This internal conflict regarding if a CPA should do both external and internal audits for a company stems from a lack of consistent and clear regulations. In The Bahamas, where I reside, the law does not limit a CPA’s right to do both types of audits (The Government of the Bahamas, 2001). However, in the United State the government does bar CPAs from providing both types of audits due to concerns about conflicts of interest (The Economist 2010). Meanwhile, in Britain the government specifically states that firms may do both types of audits for a single company, since there is little to no risk of interest conflicts (The Economist 2010).
One can see both sides of the issue. By doing an internal audit, a CPA gains an enormous familiarity with the company. This could make that CPA most qualified to conduct an external audit because he or she already knows what to look for. Nonetheless, one could also consider that, since the CPA has been previously paid by the company, he or she may be bias...
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...oned. I would do this by explicitly citing the reasons for all my conclusions in all my reports. The risks with implementing this are:
a. Clients may not like the long reports
b. The solution may consume a significant amount of my time.
In the long term, I would take on the responsibility of actively lobbying for development of regulations to clarify this issue, similar to that in the United States or Great Britain. These efforts would be implemented by submittal of reports on the issue to The Government of the Bahamas. T he risks of implementing this are:
a. Being seen negatively in the industry as a complainer
b. Spending time lobbying with no return on my investment
Upon analysis of this issue, it is clear that the best course of action would be to conduct both types of audits, while meticulously documenting my actions and lobbying for advisory regulations.
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