...ity control can not do enough to ensure that accounting and auditing issues are evaluated with professional skepticism as envisaged in the auditing standards. The inspection team noted that in several cases the engagement teams ' to important areas of the audit consisted of statements or suggestions opinions, findings of inquiries of management or management analyses. The failure of the audited company to appropriately challenge management representations occurred in several areas, even when the firm evaluates the estimates of (a) administration and ( b ) the material misstatements of the financial statements and how users of financial statements interpret these misstatements. Engagement teams involved did not check the representations properly, for instance, reviewing relevant source documentation, consulting external parties, carrying out their own analyses.
However, in terms of an audit firm, it may not pay much attention to the audit procedures since they are always the same and the firm cooperates with its client for several decades. Subsequently, the firm or auditors may hold their client’s shares so that they would like to make an extra income by creating accounting to enhance the financial statements. Finally, when the firm provides other service like taxation and management consultancy to their clients, the auditors may rely too heavily on the other services income and are reluctant to risk losing a client because of unqualified audit opinion although these services, sometimes facilitate the performance of other work by knowing sufficiently about the operations of their
The Internal Auditor position was created, as a result of a rapidly growing American economy, in the mid twenty century. The developing American economy, also known as the golden years, included inappropriate business practice. These practices included, but not limited to, stock manipulations and false business statements. Maintaining an ethical position will avoid the breakdown of organizational progress and the opportunity to correct inappropriate accounting procedures. As the need for proper accounting increased, the demand for internal auditors took place. An internal auditor will review and assure the quality of cash disbursements, cash receipts, corporate governance, ethics, financial reporting controls, fixed assets, project management, sales, and stock controls within an organization (J.L. Vergaert). It is important for the auditors to abide by and ensure the company follows the accounting policies and standards via proper communication and suggestion for correction of any inadequate process found while performing their functions.
Corporate governance is the responsibility of an organization’s board of directors (BOD). The internal auditor (IA), the external auditor (EA), and the information technology (IT) auditor all play important roles in the process of corporate governance. By using established frameworks established by the Sarbanes-Oxley Act (SOX), the Integrated Framework from the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and the Control Objectives for Information and related Technology (COBIT), organizations can demonstrate their adherence to regulations and legal requirements. Under SOX, these control frameworks have become the law and are no longer voluntary best practices. The audit process itself assists organizations to achieve proper governance. This paper evaluates the auditors’ role in the governance process and explains how auditors ensure that an organization’s governance system is well controlled and auditable. This paper also describes the likely consequences of the improper implementation of good governance.
On the other hand, an external audit is controlled by outside agency, such as the Office of the Inspector General. Healthcare organizations should respond to external investigators’ request punctually. Organizations need to develop and follow the policies and procedures for response to external audits in order to protect the patients’ right of confidentiality. The very first step that organizations must practice is identifying the origins and authorities of the individual and organization that issue the request. They can verify the identities by various methods, such as: checking information on the states’ website and calling states’ offices for Medicare and insurances companies. Once identities are confirmed, organizations can proceed to the
I have taken the time to review last year’s audit and made note of the minor problems dealing with human error and also noted that correction have been made. Because of this problem I would like to start my review here to test the controls for eliminating human errors. The IT specialist will be reviewing the internal controls of your electronic systems and
The need for expansion in global business is a necessity for big companies, and many Canadian companies are expanding their operation into overseas markets. This is a new challenge to the performance of high quality auditing, because new transaction will be made in these markets which are not necessarily follow Canadian GAAP standards for purpose of reporting. The auditors must ensure they understand business standards and regulatory that is applicable to entities that now form a part of consolidated financial statement. The auditors need to understand business structures which exist in foreign countries.
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
The inspection by the PCAOB revealed many deficiencies with KPMG LLP. First, the Firm assumed that the controls over revenue and inventory were the same at all of the client’s locations, but they ended up being different (5). The Firm did not use enough professional skepticism in its decision to test less locations, since they thought all of the locations would be the same. This deficiency related to the audit of internal control. If the controls were different then items were reported differently, which goes against the principle of consistency.
Today’s auditors must possess additional skills in order to perform their work. As more and more businesses use information technologies (IT) and set up an information system (IS) to process all their data, auditors must get acquainted with essential aspects of their clients’ information systems and also make use of information technology in order to perform their duties. In this essay, we will attempt to answer the following two questions: 1) “What aspects of clients' accounting information systems must be understood by auditing professionals?” and 2) “How should auditing professionals use their firm's information technology in performing their work?”
With reference to the auditing results of the client’s firm the company needs to put in place changes required to streamline the company performance if needed. This should be done as the first thing so that the plans put in place do not fail as a result of using bad systems, inefficient managers, poor organizational structures and poor employee relationship with the management.