Introduction
Nowadays, the global accountancy is dominated by the Big Four. Those four are Deloitte, Ernst & Young, KPMG and Pricewaterhouse Coopers (PWC). They have audited all the top 100 public companies as well as the majority of the top 350 companies (119). Thus, those four auditors dominate their market across the world. Their dominance of the market raises concerns about competition and choice in the provision of a service their clients have no choice but to buy. The domination of the auditing market by the Big Four auditing firms have include it advantage and disadvantage.
Advantages
The Big Four are international in scope and employ a large number of people. They have provided more training to their staff. Auditors working in a large office have greater exposure to different clients, and therefore have more collective experience which enables them to provide higher quality audits. This will able the auditors have more opportunity to interact with different clients. Therefore, the Big Four can help the audit market to train professionals’ auditors (8). For example, the experiences auditor can work very well and can spotlight the grey area faster. This is because an auditor is forming an independent opinion whether the financial statements give a true and fair view. Such a task needs to be performed by professional audit personnel.
Moreover, the domination of the Big Four firms can standardize the business process in order to help to improve personnel efficiency and performance and protect the confidentiality in the field of auditing. Confidentiality is a significant issue in auditing for a professional auditor. Thus, as a professional auditor should secrecy the information of the business and should not be disclose a...
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...se they have little competition the product will not evolve (a).
Conclusion
As conclude, Big Four are plays a significant role in the auditing market, there have contribute the both positive and negative influence on the auditing market. The Big Four have played a positive role in the professional development and they have audited all the top 100 public companies around. However, in the past few years, there has a numerous audit failure cases happen and cause the fluctuation in the economic. Therefore, I believe that the domination of the Big Four audit firm will cause a lot of disadvantages to the audit market. As the Big Four audit dominance not best for investors and it also hurts the competition for public company audit work and result in higher prices, lower quantity and less innovation and differentiation than would be the case in a more open market.
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
As quite data, we tend to use to assist and result in the acceptable call within the business ought to be consistent and dependable. On contrary, the knowledge that isn't reliable will result in injury and ineffective use for the resources of the corporate, unhealthy and damage result to the business and influence its higher cognitive process. To avoid unreliable data and wrong higher cognitive process and to confirm the accuracy within the work in step with the foundations and rules, there should be what's referred to as proof or (Audit), which is handled by freelance and qualified individuals. From all of this, we will acknowledge the importance of auditing method for all businesses. Within the corporations, the auditoris required to state clear opinion, if or not the annual accounts offer the truthful sight concerning the state of the corporate and its money position. To precise the opinion, the auditors shouldmeasure the register of the business, examine its assets and transactions. Altogether cases, the auditor ought to perform his job with due skilled care and high skil...
Even though before this time period a company’s auditors were required to maintain an independent view since they were suppose to act as a protector to all end users it was not always the case. An environment was created with a Utilitarian approach that said company’s can offer package services that offer consulting services why at the same time audit the company’s financial statements. But when issue arose it became difficult to jeopardize the superior revenue that was obtained through consulting
...ions and to provide a thorough analysis of the reports and statements prepared by the internal auditors before certifying their validity. Auditing in order to be an efficient form of corporate governance needs to be pro-active and watchful. Satyam’s case provides us with very useful practical lessons that can be applied to ensure efficient corporate governance. Useful practices to reduce the risk of poor auditing performance may include (a) periodic rotation of audit firms and audit firm partners, in order to avoid collusion between the to entities and reduce dependency; (b) regular peer review, to expose possible fraudulent activities or negligence; (c) evaluation of reports of audits, transparent corrective actions and clarity in reports, which can enhance and ensure trustworthiness in the auditing system as an efficient and effective form of corporate governance.
The implementation of big data into the audit profession will be welcomed considering the current business environment. While there are some drawbacks, big data has a role in audits. The main questions that will face the new wave of auditors will be in which ways and how big data can be used in the audit program. It’s clear that auditing standards, clients, firms, and higher education will all have to address these issues in the near future as audit adapts to the potential of big
In the ever changing business world and environment, there is a need for stability and reassurance about the credibility of any organisations financial reporting. The role of an auditor is to be an independent party that assesses the accuracy and credibility of an organisations financial information in order to provide assurance to end users (Antle, 1984). There has been a notion that the quality of an auditor’s opinion lies solely on the auditor’s professional judgement by the public, however the audit profession has argued that audit quality is not just reliant on the judgement of an auditor, but rather from the inputs from many stakeholders involved with an organisation. In this essay we will discuss what audit quality is, the audit quality model and finally determine which view is relatively more correct in today’s business environment.
Sometimes fraud may be created and concealed in a way that is so well-organized that it might be overlooked if auditors fail to perform reasonable care and skills. This always happens in entities that have knowledgeable people in accounting, finance and so on. Therefore, every auditor must maintain a questioning mind throughout the audit and set in his mind that material misstatement due to fraud may exist even though his past experience with the clients shows that the clients are indeed
Professional judgement is a necessary skill for preparers, auditors and regulators of financial statements to have. A professional accountant with good judgement will be able to serve the needs of businesses, the public and investors in the best way possible. Principle-based accounting will help preparers and auditors make and document significant accounting judgement. Guidance is also provided for regulators involved in assessing key judgements, and recommendations are made for standard setters in maintaining and producing principle-based standards which provide the scope for professional judgement. The framework is intended for different sized companies. The audit committees have a key role in challenging initial judgements. They speak to the auditors and make recommendations to approve key judgements. As business transactions become more complex, the validity and usefulness of financial reporting relies on good judgement to be made. We believe that a professional judgement reinforces the quality and integrity of the judgements made and also trust in the operation of principle-based financial
Conflict of interest is a big problem between Enron and its auditing firms. It is believes that Enron’s auditors was hide many information and external auditors never aware or hide the losses in Enron. From audit committees to transparency committees would increase the likelihood that a firm’s key business ricks are transparent to investors (Healy & Palepu 2003, p. 21). Besides, a transparency committee can also help with internal auditor appreciate its primary responsibility lies with the board, not for personal interest and pleasing the leader.
Auditing plays a vital role in business, government and economy. The key value of auditing is its ability to provide an independent assurance on the integrity and fairness of financial information produced by companies and other entities. An auditor is under a statutory duty to report to members on the company’s financial statements for an accounting period and on the accounting records relating to those financial statements (s.308). Auditors are required to provide an auditor’s report to the members (i.e. shareholders with voting rights) of the company concerning the financial statement audit. The auditor must express an opinion on whether the financial statements are in accordance with the Corporations Act, comply with accounting standards (s.296) and give a true and fair view (s. 297).
...pendence, whether pro forma or substantially, the quality of professional assurance service of professional accountants will be doubted by public and that will probably lead to serious results. The factors affecting independence of external auditors are multiple. Market competition among external auditors and the imperfection of laws regulated the external auditing industry are tow of most important factors. In order to maintain and guarantee the independence of external auditors and try to avoid the scandals like Arthur Andersen, some research on how to improve and maintain the independence of external auditors are necessary. It is possible for researchers to put emphasis on how to control the market competition among auditing organizations and enhance the ability of accounting regulators to supervise and manage the professional accounting industry in the future.
Almost all professions are demanded by a society to be ethical, especially the accounting profession. The accounting profession was founded on the notion that proper ethical behaviour is the cornerstone of providing professional services to clients. The collapse of Enron, the largest energy-trading company in the US had jolted the profession out of its complacency and serves a warning that all is not well with the profession. Ethics had aroused significant interest amongst practitioners and academics alike. The message is clear that it is under scrutiny, if accountants want to be relevant, they have to be more diligent and ethical. In recent years, there are many financial scandals in some very big corporations in Malaysia. According to the former Malaysian Institute of Accountants (MIA) President, Abdul Rahim Abdul Hamid, the responsibility of any wrongdoing in any company is on the shoulders of the directors, senior management team as well as the auditors, among others (MIA, 2007). As a result, litigations taken against auditors are increasing in number. For example, there are many financial scandals which include Perwaja Steel, Oilcorp Berhad, Transmile Group Berhad, Megan Media Holdings, Southern Bank and Technology Resources Industries Berhad.
The auditors with high professional skepticism are likely to bring more persuasive evidence in terms of quality and quality of information that leads to more accurate financial reporting with error free statements. So for conducting effective audits it is necessary for auditors to adopt professional skepticism. A model has been presented in the paper that is used for highlighting dependence of audit evidence on auditors’ knowledge and certain traits including incentives for producing making accurate judgments reflected through professional
The major characters of the tradition audit are all information what is needed by auditors are on the paper and the manual calculators and without high communication technology. Auditors usually were limited by the place in the paper time. When a several people are working on the same auditing project for a client with offices in cities across the country, even worldwide, it takes a lots all time those auditors get the information which they need from the client, even there is risk paper information disappear for many reasons. on the another hand, mail paper information increase the auditing cost. The mistake caused by the manual calculators inevitably, no matter how fixed auditors concentrate on recalculate is, after all auditors are human. The global business become major in the modern business world, some example, several auditors who are in different locations are working a same auditing project, or auditors are in different city even country with the client, when there is issue among these auditors or between auditors and client, they only can communicate with each other by phone or be together and have meeting. Phone call can not make sure information been watched in the same time when the voice is talking about the issue, but having a meeting takes time and money make all people together, it increases auditing cost.
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.