"The auditor 's job is to exercise professional skepticism in evaluating a public company 's accounting and in conducting its audit to ensure that investors receive reliable information…” (Aubin, 2016). E&Y did not do their job and the PCAOB had every right to fine the firm. Make a recommendation as to how regulators and professional societies may prevent this type of behavior in question for the future. Provide support for your rationale In this case, E&Y should not have been allowed to conduct Medicis audits for 20 years. There was already a conflict of interest established by their relationship years and there is no way that E&Y could have maintain its independence.
Ineffective audit committee in the Enron and case and no audit committees in the Swaziland railway case and CTA case. According to the King 111 report and the Sarbanese Oxley Act 1) The board should ensure that the company has an effective and independent audit committee The (IOD: 2009) stressed that good corporate governance best practices dictate that a company should have an audit committee. Thus, in line with this principle, the board should approve the terms of reference of the audit committee. 2) The audit committee members should be suitably skilled and experienced non-executive directors Furthermore, the (IOD: 2009) contends that all members of the audit committee should be independent non-executive directors and there should be at least three members. The audit committee should collectively have sufficient financial knowledge of financial risks, financial sustainability reporting and internal controls.
Auditors need to be an independent person. Independence in mind which is the auditors needs to perform an unbiased attitude, and also independence in appearance which is the auditors is prohibited to have any relationship with the client. Thus, how auditor’s response to the EM has been the issues here. Auditors play an important role to produce a high quality audit in order to avoid fraud or accounting scandals, for example like what happen to Enron. According to Reem and Ali, (2011), the previous study mostly examined the relationship audit quality with the size of the audit firm.
The role of auditing is to have an unbiased individual look at the financial statements to confirm that the financial reports that have been issued by the clients are following the rules of GAAP, and if they are not following GAAP, an opinion needs to be stated saying that the financial statements are not in accordance to GAAP. One structural feature of the accounting profession is auditor offering more services other than just an audit. Accounting firms today are focusing on offering more and more services to their clients to grow revenue and profits. This means instead of an audit firm being just an audit firm; they start to become advisors and get more involved with their client’s business. Another structural feature of the account profession today is auditors leaving their audit firm and taking jobs with their clients.
Senior level of auditors may always supervise the lower level in ensuring that they are exercising professional skepticism as required. Besides that, to detect management fraud, external auditor must looking at the size of the client. If the client is a small size business, auditors need to aware that fraud management may be higher that big size business client. Because there is less to maintain audit committee in the small size business, therefore auditors need to advice the internal control to exercise audit committee in the management in order to prevent fraud an also perform more test of controls. While a big size company, auditors need
Authority: The Audit Charter should clearly specify the Authority assigned to the Information Systems Auditors with relation to the Risk Assessment work that will be carried out, right to access the Client’s information, the scope and/or limitations to the scope, the Client’s functions to be audited and the auditee expectations; and 3. Accountability: The Audit Charter should clearly define reporting lines, appraisals, assessment of compliance and agreed actions. PHASE 2 – Risk Assessment and Business Process
They expect and demand unreasonably and unjustified services from auditors. Almer and Brody (2002) affirmed that a business failure is always associated with an auditor’s failure; in spite of the fact, he takes all appropriate measures. He additionally added that one of the possible causes of the expectation gap is the auditor’s ambiguous communication with customers. They argued further that an auditor can carry out his audits in accordance with the generally accepted auditing standards and still be found negligent in not preventing risks to financial statement users. However
In the past these ethical standards holds the futures of ethical guidance issued. But now has added more features and generally more stringent than preceding guidance. For example: the Internal Financial Accounting Code (IFAC), they base on principles rather than rules and highlight objectivity from the point of view of logical and knowledgeable third party. They fulfill with ethical principles issued by the European Commission (EC). Separately from the five ESs, APB also issued a statement of Provision Available for Small Entities
Auditors also create standard procedures for change management e.g. new software development software upgrade (applying patches), procedures for managing increasing volume of enterprise data in big data analytics, procedures for developing new security tools and application (cyber security & network security) and finally procedures for managing cloud computing/virtualization activities. In conclusion, managing all these with objective audit documentation and evidence approach while adhering to compliance requirements can be tasking. However with the help of audit tools, IT and analytical skills the internal auditor can ease
Regardless of the possibility that a percentage of the internal auditors ' exercises are important to the review, the examiner may reason that it would not be effective to consider further the work of the internal auditors. On the off chance that the auditor concludes that it would be effective to consider how the internal auditors ' work may influence the nature, timing, and degree of review systems, the examiner ought to survey the skill and objectivity of the internal auditor’s work in light of the planned impact of the internal auditor 's work on the audit (SAS,