1. Introduction
The importance of internal audit has certainly raised up along with the transforming business environment. Nowadays internal audit standards and theories have been actively discussed, yet there are still many debates on the ambiguity of internal audit professions’ foothold and their duties. Moreover, the internal audit scandals have never been out of sight: FIFA (2015), Toshiba (2015), Libor (2012), Olympus (2012). Practitioners and scholars study the audit methods, the effectiveness, the factors, etc. that impact the internal audit, but it is only useful once the outputs of internal auditors are realised to outcome.
The Greek philosopher Heraclitus (513BC) enounced “There is nothing permanent except change”. The concept of
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Concerning IA’s role to protect the organization, Basel (2012) and UK Committee on internal audit guidance for financial services (CIIA, 2013) hold two opposite opinions. When matching the concluded characters of IA from different definitions, IIA provides the most exhaustive definition, which has not been changed since 2001. Thus, in this part the normative internal audit concepts will be drawn from the IIA standards and …show more content…
21-22) standards defines “independence” as “The freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner” and gives the definition of “objectivity” as “An unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others.” Yet independence and objectivity refer to different objects. The IIA (2012, p. 4) Standards also require audit independence at organizational level which means “chief audit executive (CAE) must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities and objectivity for individual internal auditors”. It stipulates audit objectivity on an individual level, “Internal auditors must have an impartial, unbiased attitude and avoid any conflict of interest”(IIA, 2012, p. 4). The Code of Ethics (IIA, 2009, p. 1) also consists of principles restricting internal auditors as well as roles of conducts depicting norms of internal auditor behaviors. There is one principle for objectivity: “Internal auditors exhibit the highest level of professional objectivity in gathering, evaluating, and communicating information about the activity or process being examined. Internal auditors make
When it comes to the audit objectives, the public and the auditing profession maintain varying expectations. The public expects the prevention of fraud to be the auditor’s responsibility. However, the auditors believe that they are responsible for fraud detection, but not obliged to find all of it. In addition, the public views the fraud by the characteristics displayed by management and employees. For example, WoolEx Mills’ management wanted to exude a prevailing financial position and to uphold reputations. By committing financial statement fraud, it made the company look successful even though Sales and cash flows were decreasing. The public would view these particular characteristics as pressures to why the company committed fraud. Greed, recognition, and influences also impacted the public’s view of Wool Ex Mills’ fraud scheme. The CEO used authority to influence employees to take part in the fraud scheme. The public would see that the CEO utilized power to manipulate shareholders, which impacted their trust with WoolEx Mills (Cohen, Ding, Lesage, & Stolowy 2015) (Krishnan & Shah
A great example of Heraclitus’ view would be one of his most famous quotes which is “No man ever steps in the same river twice, for it's not the same river and he's not the same man.” This quote demonstrates his views on change because in this quote he clearly shares his idea of what change really is. He believes that everything is constantly changing for instance the water in the river is flowing and thus it is always changing and as for the person standing in the river, they too have changed because since time passes they are not the same person that stepped into the river. Heraclitus also stated that there is a flux in the universe for everything there is an opposite and that is mentioned in (B88), “the same thing is both living and dead, and the waking and the sleeping, and young and old; for these things transformed are those, and those those transformed back again are these.” These contradictions give us a precise idea of how they are connected to each other; old-young, alive-dead, and asleep-waking up.This quote is an example of how one thing can be changed into
Objectivity and independence is most related to the section 5062.2 of CA Accountancy Act because both focus on maintaining objectivity and be free of conflicts of interest in making professional decision. In addition, section 5062.2 shows that a CPA should not accept employment with the Corporation that they audited within last 12 months.
The independence of mind or independence in fact means Betty has to have a state of mind that allow her to form an opinion without bias due to influence that compromises professional judgment. By having an independence of mind allowing an individual to perform his or her audit work with integrity, as well as, maintaining her objectivity and professional skepticism behavior. However, in this case, she did not have an independence of mind since she trusted Toby and she enjoyed working with him since he is also a CPA because it is easy for her to work with him compare to her other clients who do not have the accounting background. As a result, because of long-term relationship and trust that Betty has with Toby, it influenced her decision about the audit opinion. Additionally, to be independent in appearance Betty and her audit team must show unbiased professional judgment when she reviews her clients ' financial statements. Betty had Problems with independence in appearance because in the case study shown me that she has become too close to her client, Toby. Therefore, all auditors have to maintain their professional skepticism as well as maintain independence in their mental attitude and also independence in appearance to provide an unbiased opinion on
Objectivity also needs to be evaluated to make sure the internal audit is reliable. The internal audit needs to be free of conflicting responsibilities as well
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.
According to the article authored by Mark Rupert, what are the seven best practices in the roles and responsibilities of an internal audit function?
Integrity in the accounting profession involves adhering to the rules and principles of the profession. This includes remaining free of conflicts of interest and maintaining client relationships in which the accountant can remain objective in discharging his or her responsibilities. This requires independence in fact and in appearance as mandated under section 1.200.001.01, Independence Rule the AICPA Code. In other words, no one should be able to view the accountant as being biased with respect to a client’s financial reporting due to an improper client relationship. Lack of integrity in accounting practices has been, and continues to be, a key element in the downfall of many institutions which has hurt the public trust in the accounting
It is highly essential for accountants and business professionals to maintain a standard of ethical conduct in the workplace as the nature of their work places them in position of trust. (Senarante, 2011). Accountants have the responsibility to ensure that their duties are performed in accordance with the five fundamental principles set out in the Code of Professional Ethics such as integrity, objectivity, professional competence and due care, confidentially and professional behaviour (Cunningham et al. 2014). Accountants are expected to be reliable and trustworthy. Thus they are required to act ethically in relation to their clients, employers and the general public in order to provide quality services in the best interest of the society (Eginiwin & Dike, 2014). The International Federation of Accountants (IFAC) have established a code of ethics for accountants, allowing each specific country to add their own national ethical standards to the code to reflect cultural differences. The code provides emphasis on the five fundamental principles as well as resolution of ethical conflicts. In Australia, professional accounting bodies such as CPA Australia, Institute of Chartered Accountants in Australia (ICCA) and the Institute of Public Accountants (IPA) adopt the Australian Professional and Ethical
As per ISA (NZ) 200-A17, this ethical requirement includes the auditors integrity, objectivity, professional competence and due care, confidentiality, & professional behaviour. Integrity is an ethical attitude which includes the auditor’s honesty, accuracy, and fair practice. Objectivity is a mental attitude while carrying out the audit wherein the auditor is fair and just with all his/her work. Professional competence is the knowledge and skill of the auditor, gained through education, training and experience, while due care is a degree of care of an auditor on certain situations wherein an he/she must act diligently. Confidentiality is the commitment of the auditor not to disclose any information regarding his/her client, unless required by law. Professional behaviour means the auditor must act in accordance to the law and set of standard as a manifestation of respect to the
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.
Change is defined as the process of becoming something different, it occurs throughout the natural world and our bodies are a simple example of development and aging in the natural process. In Plato’s Cratylus it has been interpreted to say ‘Heraclitus, I believe, says that all things pass and nothing stays, and comparing existing things to a river he says you could not step twice into the same river’ (Plato, Cratylus 402a). There are problems that arise with the Plato’s interpretation of Heraclitus’ philosophy, was it Heraclitus’ intention to suggest that permanence and change are in a constant partnership or was it his suggestion that change cannot co-exist with permanence? These are some of the question that will be attempted in this essay.
...tion of permanence meaning that anything that appears to be forever and permanent is not inclined to change. Basic change, hence, is not possible. Each and everything have been in existence and will always be in either in one way or other. This notion of Parmenides directs him to the result that due to permanence there is an undivided unanimity within the world. Heraclitus on the other hand took an entirely different stand point and proposed that the world was directed and administered by a divine or spiritual rationale or logos. His assertion that the world has always been a subject to change and it stays in constant change and modification is the chief theme of his argument. He persisted that change prevails within the reality and the unknown and all- pervasive Being is there and commands the universe and all the things will remain subject to change for eternity.
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
...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.