Introduction
Auditors play an important role to promote the public interest by providing accurate and independent audit reports about the financial report (Public Company Accounting Oversight Board, 2016). However, scandals like Enron and WorldCorn have cause public doubt and distrust the auditor and audit quality. The public thinks only auditors contribute to the outcome of auditing. However, professions believe auditor not only responsible for audit quality but also many stakeholders affect audit quality. This raises a question about how to explain the profession views is correct.
To answer this question it is important to understand what audit quality actually means and the demanding improvements in audit quality first. DeAngelo (1981)
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The first section discusses how stakeholders influence the skill, experiences and independent on the inputs of audit quality. The second section argues stakeholders affect audit quality in the process of audit quality. Then, third section will describe the output of audit quality is impacted by stakeholders. At last, this essay will give a conclusion about stakeholders are responsible for auditing …show more content…
These inputs are influenced by different stakeholders by several ways. At first, Regulators create a good ethical environment on audit job. An aim to a good audit quality and restoring public confidence, regulators issue ethical standards as the fundamental principle to assurance practitioners. New Zealand Auditing and Assurance Standards Board (XRB) issued Integrity, objectivity, professional competence and due care, professional behaviour as the fundamental principles to all assurance practitioners. The important of the code of ethics are which improve decision making and judgment of auditor. (Pflugrath, Martinov & Chen). New Zealand Institute of Chartered Accountants (NZICA) also requires their members equip the code of ethics to ensure they have professional conduct in auditing job (Chartered Accountants Australia and New Zealand, 2016). These principles ensuring auditors is morally accountable to their clients (Gay & Simnett, 2015). Professional account organizations play an important role to ensure auditor have qualified skill and experience in the input of audit quality. High barriers to entry into the profession body aim to select good members who have high level of skill and who complement the education requirement (Davey & Hooper, 2013). For instance, people have to complete academic study and professional programmer with practical experiences for becoming a member of Chartered
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.
Gray, Iain and Stuart Manson. The Audit Process: Principles, Practice and Cases. London: Thomson Learning, 2008. Print.
Audited party attributes interrelated to the ability of the audited party to achieve expected goals. Implications of audited party attributes on tax audit effectiveness consist of the ability of audited party to effectively and efficiently meet the sub-goals of organization, attitude of audited party towards tax auditing and the cooperation level provided to the auditor. The auditors are required to fully and unlimitedly access to all activities, records and properties and cooperate with the audited party in order to attain an effective tax auditing work. Hence, the attributes of audited party have a positive effect towards the effectiveness of tax
Auditing is used to enhance the degree of confidence that users of financial statements have in those statements. This is achieved through gathering sufficient evidence to come to a conclusion on whether the financial statements are prepared “in all material respects, in accordance with the applicable financial reporting framework”. (IFAC, 2013). This usually refers to how true and fair the statements are when looking at the financial position of the company at the end of the period.
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
Experience as an auditor enabled me to find out necessary information, whether the interviewee was cooperative or not, but this problem reflected a reliance on more old style quality assessment in Company X, which, in my experience, frequently was seen as an attempt to blame individuals or point out they were doing something wrong. This naturally leads to some defensiveness and resistance to the audit process. Reflection confirms that the ISO standard is vital to provide clear guidance for the audit, but does not guarantee that an organisation will be performing
Since the framework serves as the compass guiding the way for internal auditors it was important to add a mission statement to state the overall goal of internal auditing. The mission statement requires internal auditors to provide assurance to stakeholders by doing an in depth and thorough analysis of the evidence gathered. The mission statement also requires that internal auditors provide insight through advice to the stakeholders of the company. For example these points in the mission statement prevent an internal auditor or the management of a company from preventing the release of the information gathered and the result of the internal audit from stakeholders and society. Adding the core principles to the IPPF helps society and stakeholders in two ways. Having the core principles clearly drawn out helps to keep internal auditors in check by providing them with a set of “rules” of how they should be and what they should value. Including the core principles in the IPPF also gives stakeholders and society a set of “rules” to which they know they can hold their internal auditors up to. Stakeholders and members of society know that it is mandatory for their internal auditor to promote organizational improvement and they can rely on an internal auditor who follows the framework to be doing so. The restructuring changes made to the recommended portion of the IPPF has allowed for a broader category. Decreasing the scope of the recommended category allows for the creators of the IPPF to add any outside needed information to the framework that will progress the professionalism of the internal audit practice that previously wouldn’t have been
Rittenberg, Larry, Bradley Schwieger, and Karla Johnstone. Auditing. 6th ed. Mason: Thomas South-Western, 2005. 10-40.
Audit quality is often defined as the probability that auditors will detect and report misstatements or unintentional measurement errors in the financial statements (DeAngelo 1981). This stems from an auditor’s competence and independence, in both how they are perceived and in actuality (Watkins et al 2004). This is of vital importance to analysts because financial statements form the basis of forecast inputs. The outcome of a financial analysis model can only be as accurate as the values used to create said model. As such, if input values are inaccurate, the output (forecasts) would no doubt also be erroneous. Dang (2004) argues that by limiting errors in the historical data used to formulate forecasts, high quality audits will improve the
Auditors’ independence has become a serious issue and an aggressive debate commenced after the big corporate collapses (Enron, WorldCom) in the United States in 2002 (Ahmad et
The aim of this essay is to study the function of external auditors in order to analyze why it is important to be independent. The primary mission of external auditors is to review and evaluate all the financial records of a company or corporation. They provide an objective opinion on the organization’s financial statement and effectiveness of the accounting polices in order to help management to make decisions. If the independence of the external auditors is impaired, the public will doubt the quality of professional auditing services, and the consequence would be very serious, just like the bankruptcy of Enron led to the disorganization of Arthur Andersen, once a giant accounting company in the world. In order to maintain and increase the independence of external auditors, some activities should be undertake to avoid the overdue market competition in professional accounting industry and enhance the supervising ability of the regulators. .What follow is a detailed analysis of the association between external auditors and companies.
Audit firm rotation can be divided into voluntary audit firm rotation and mandatory audit firm rotation (Firth, Rui, & Wu, 2012). When the client decides itself to switch audit firm without obligation (e.g., high fees and low audit quality), this is referred to as voluntary audit firm rotation (Firth et al., 2012). Audit firm rotation as a result of regulation is referred to as mandatory audit firm rotation (Firth et al., 2012). Whether audit firm rotation should be mandatory in order to increase audit quality has been discussed for more than 60 years and the discussion is still ongoing (Myers, Myers, & Omer, 2003). According to Myers et al. (2003), the confidence in the regulatory system can be restored through audit firm rotation. Firth et al. (2012) mention that mandatory audit firm rotation is of less importance in high developed countries, but of high importance in less developed countries. This is because in less developed countries the self-discipline and market forces are lower than in highly developed countries (Firth et al., 2012). Proponents of mandatory audit firm rotation believe that increased audit tenure will decrease audit quality (Myers et al., 2003). Opponents mention that mandatory audit firm rotation will lead to an increased likelihood of audit failures (Myers et al., 2003). Both pros and cons are discussed in section 2.2.2 and
As internal auditors are integral parts of corporate governance, therefore their contribution is to ensuring the reliability and integrity for the financial statements of the company. Internal audit are also contribute in such as way where they are evaluating the operational performance of a company, ensuring the effectiveness of internal control system. Besides, internal auditors also review the financial reports to ensure its integrity and transparency so that useful and reliable information are available for the decision making. Moreover, this is to ensure a responsible governance is carried out and prevent fraud from happening. If so happen fraud occurs, internal auditors are there to carry their job to detect the fraud and correct the fraud especially in the financial statements which may threaten the reliability and quality of reports (Mihaela Ungureanu,
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.