Auditor Independence - 2

Accountants are held to a higher ethical standards and they must performed their duties in compliance with standards or ethical values of honesty, integrity, objectivity, due care, confidentiality, which must be fully committed to. They must put clients or public interest first before their own. They must have and ethical values and maintain those values way beyond what the society or the company’s code of ethic. It is important that accountants’ behavior or ethical values is in conformity with the

This research paper analyzes the degree of an auditor's liability to clients and third parties under applicable law.

My three-years of studying at HKU afforded me with the knowledge of financial accounting and now, as a senior, I am able to consolidate complex financial statements. However, after spending an internship working with auditors, I begin to realize the many potential pitfalls inherent in the auditor/client relationship. Facing a huge amount of pressure from their clients, who, of course, are paying the bills, auditors who should be independent commonly bend the rules to curry favor with clients and

The Auditors’ responsibility for the detection of fraud is an ongoing issue that is surrounded by much controversy (Gray, Manson and Crawford, 2015). It is believed by many people that Auditors are responsible to detect fraud and have the ability to do something about it, while In fact they have a very limited role in the detection of fraud. The public’s misconception of the auditors roll and what the auditors roll actually is, is referred to as the expectation Gap. In the auditing profession they often have to keep up to date with the up to date standards from the International standards on auditing, these are important, as they are required to keep up with the constant evolving of the rules and what is expected of them. These standards are often referred to as ISA’s, the main focus of these will be ISA 240, this is the standard that covers fraud, and plays a large part in the way auditors do their statements. Throughout this essay we will be able to critically analyse what role the auditors play in the detection of fraud and what the public believe the auditors role is.

Sometimes, auditors always have client pull documents, prepare various schedules to which audit procedures will be applied, and perform other important audit-related tasks. In completing these tasks, client personnel can often determine the auditor’s intent and the scope limit of a given audit test. Likewise, clients have access to the professional auditing sources and professional publications that discuss the general guidelines that auditors use in making important strategic decisions during the course of an audit, including the

As the wide-ranging business environment goes down, the rate of auditor litigation has increased. Lawsuits are a continuous threat to the auditing line of work. In this paper, we present evidence on lawsuits having a positive effect on auditors audit liabilities. It is the auditors’ responsibility to plan and complete the audit to obtain practical guarantee about if the financial statements are free of material misstatement or if they are caused by error or fraud. A mixture of court decisions and economic state of affairs has shaped the legal setting for the auditing line of work and the resulting lawsuits. Even though auditors are potentially legally responsible for both criminal and civil offenses; lawsuits have encouraged auditors to reduce their risks of legal action by instituting sound quality control and look at procedures. The majority of the time, for litigation to arise, the auditor must have given an unqualified audit opinion to a set of financial statements that are afterward revealed to have material misstatements or material omissions. According to the ACCA an auditor liability is increasingly concerning, both in terms of audit quality and the reputation of the profession but also in terms of the cost to the industry and the barriers this creates to competition within the audit market.

In addition, an accountant is not independent of an audit client if an audit partner received compensation based on selling engagements to that client for services other than audit, review and attest services. Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and nonaudit fees paid to the audit firm for the two most recent years. Four categories of fees are to be reported: (1) audit fees; (2) audit-related fees; (3) tax fees; and (4) all other fees. Companies are also required to provide further breakdown of the “other fees” category, and provide qualitative information on the nature of the services provided. 4-8 The rules concerning stock ownership by partners and professional staff: A partner in the office of the partner responsible for an audit engagement cannot own stock in that audit client. A partner can own stock in an audit client, as long as (1) he or she cannot influence the audit engagement and (2) he or she is not in the same office as the partner responsible for the audit engagement. A professional staff member cannot own stock in an audit client if he or she is assigned to the engagement or if he or she becomes a partner in the office of the partner responsible for the audit engagement. A professional staff member can own stock in a firm’s audit client as long as he or she does

It’s trust-worthy and reliable to have independent and unbiased auditors confirm that an organization’s claims about its financial position and the process behind these claims are true and independent. The most important element for the audit report and opinion should be free bias. In order to achieve this goal, auditors need to be objective. Auditor, as one part of the professional accountancy bodies, is required to obey the ethics codes, which ensure the auditor to be independent.

Auditing is a subject that applies to most business as there is the need to make constant financial sense of the resources they are employing as well as what they are getting out of it. When taking auditing as a profession into consideration, there is the need to understand that auditors just like lawyers have an association that they have to answer to in terms of their conduct while performing audit operations. The body allows for rules and regulations to apply so as to allow for a standardize means through which audit process will universally apply for any given nation.

Abstract. The article reviewed was Ethics and the Auditing Culture: Rethinking the Foundation of Accounting and Auditing. The key of the abstract is to demonstrate how traditional ethical settings led to unethical behavior and financial scandals of Enron, WorldCom, and Arthur Anderson (p. 271). The authors emphasize the role of the AICPA Code of Conduct and ethical perspectives for accountants and auditors.

However, it is not appropriate to neglect contributions from the APESB in assisting the assurance of audit quality. It is the fundamental flaw of the ethical standards of all types that hinders the full efficacy of ethical standards on the quality of auditing processes. Ethical standards still serve as dynamic supports to legal framework. Both the staffs from the audit firm and audit regulators are required to review auditing processes to compensate the imperfection of legal framework and code of ethics.

More specifically, “accountants in public practice should be independent in fact and appearance when providing auditing and other attestation services” (AICPA Independence and Conflicts of Interest). Independence in fact means ___. Independence in appearance means ___. Independence will be impaired under the AICPA rules if an accountant does either of three things. First, if the accountant “makes investment decisions on behalf of audit clients or otherwise has discretionary authority over an audit client’s investments.” Second, if the accountant “executes a transaction to buy or sell an audit client’s investment.” Third and lastly, if the accountant “has custody of assets of the audit client, such as taking temporary possession of securities purchased by the audit client.” In these cases, Independence would be impaired because the accountant would be aware of insider information, which could benefit the accountant when making their own personal investment decisions. However, there are ways in which accountants can provide services that do not impair independence. First, if the accountant “recommends the allocation of funds that an audit client should invest in various asset classes, based on the client’s risk tolerance and other factors.” Second if the accountant “provides a comparative analysis of the audit client’s investments to third-party benchmarks.” Third, if the accountant “reviews the manner in

The responsibility of accountants is crucial. Accountants serve as financial reporters and intermediaries in the capital markets and owe their primary obligation to the public interest. They provide significant information in economic decision making to investors, managers and others. If the accountants will not follow the ethical guidelines, then this could prove to be hazardous for the society and capital market

Auditors provide a key investigation function in the business world. The law in relation to the liability of auditors changed significantly with the introduction of Companies Act 2006. It is now possible for audit firms to limit their liability towards clients through contractual agreements. The current auditing liability regime has proven to be controversial. This essay will first present the relevant liability rules and examine the underlying problems, then evaluating the significance of these rules with regard to auditing reforming.

This includes the indirect ability of management to influence the career prospects of internal auditors, as well as the budget and planning of the internal audit function. This is exacerbated by internal auditors themselves using the function as a stepping stone to advance their career objectives. It also can be argued that the independence theory may be lost in such a culture, especially if it is combined with people within the organization perceiving internal auditors as partners, thereby subjecting the internal audit function to pressures threatening its independence, rather than recognizing the internal audit function as an independent assurance function("A Critical Analysis Of The Independence Of The Internal Audit Function: Evidence From Australia: Accounting, Auditing & Accountability Journal: Vol 22, No