How Audit Is Important For Public Interest By Increasing Accountability And Trust

The audit of financial statements is mandatory for publically listed entities throughout the world. The auditor conducts various tests and based on the results forms an opinion on the truthfulness and fairness of the financial statements of the company and whether or not they are prepared in accordance with the financial reporting standards and are free from any material misstatement (Freedman, 2013). The purpose of auditing is to enhance the confidence of investors and to add credibility to the truthfulness of company 's true financial performance. However, there are some dos ' and don 'ts that an auditor must take care of. For instance, anything that threatens the independence of the auditor must be avoided as it adversely affects the truthfulness and objectivity of the opinion formed.

An important decision for any shareholder is deciding whether or not to do business with that company. When a business is audited, the operations are reviewed to make sure that nothing is being hidden. An auditor will review the company’s financial statement and practices to confirm that each are direct and correct. The financial statements are the business’s way of representing them and showing that they are following the Generally Accepted Accounting Principles. The audit process is an important one because it provides a platform for the auditor’s opinion concerning the financial statements of the company. As part of the audit process the auditor will conduct an audit plan that outlines a number of actions that he or she will be perform while also detailing the reason for those actions. With every audit, the business’s management is in charge of handing over the financial statements that the auditor will review; while the auditor will review the statements for any material or immaterial misstatements.

It highlights the importance of auditors applying sensitive and ethical judgments in all their engagements. Members have the responsibility to collaborate with each other to improve the art of accounting, as well as to maintain the public’s confidence. The auditor’s responsibilities are essential to an effective audit process because through planning, auditors should to communicate with each other, be very organized and discuss what and how to do things in order to serve the public. One of the most important parts in auditing is planning, for that reason responsibility is a must.

9. What has been done, and what more can be done to restore the public trust in the auditing profession and in the nation’s financial reporting system?

The first article researched was The Anatomy of Corporate Fraud: A comparative Analysis of High Profile American and European Corporate Scandals. The abstract discusses the analysis conducted on the three major American accounting scandals; Enron, WorldCom, and HealthSouth, and compares to the three major European accounting scandals; Parmalat, Royal Ahold, and Vivendi Universal. Bahram Soltani (2014), also discusses within the abstract the different areas reviewed regarding why the accounting scandals occurred; ethical climate, tone at the top, bubble economy and market control, fraudulent financial reporting, accountability, control, auditing, governance, and management compensation (p. 251).

This essay will discuss the ethical code that has major influence on audit failure and what scholars are saying towards auditor’s credibility and auditor’s code of ethics because when a company goes bankrupt the auditor’s independence is questioned and shaken (Moore et al 2006). It will also show what legislative body governing auditors are doing because users of financial statement are searching for auditors whose obligations covers: report of correct records, assurance that the financial statement is of true and fair view, company guards against errors and fraud, auditors are abiding by the rules and so on (Percy 2007).

Auditing is one of the most critical fields where the external auditors are always subjected to criticism and legal regulations which are mostly directed against them. Mostly this criticism arises because of lack of sufficient understanding of how the company law and auditing standards work and also due to related misconception about the actual role of an auditor (Porter, 1993). This lack of understanding is called expectation gap where the outcomes of the audit expected and its actual purpose varies. One solution to this fundamental issue is to reduce this expectation gap by providing a clear definition of auditor's role and also the audit function that is required to be performed by him. However, during this defining phase, it is necessary to consider whether an audit rotation would reduce this audit expectation gap.

As the business world grows more increasingly complex, external auditors must continue to remain impartial and loyal to ethical guidelines when reviewing a company’s financial records for reporting purposes. In general, under audit rules, external auditors are required to lookout for potential fraud and conduct a variety of checks to try to unearth it; however, they aren’t

The PCAOB proposed auditing standard, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, as a result of recent outreach projects concerning the usefulness of the audit report (PCAOB 2013b). Through these projects, the PCAOB discovered that investors and other financial statement users view current audit reports as lacking in significant information. The PCAOB’s surveys suggest that investors and other financial statement users would like information on the most significant matters the auditor addressed to be included in the audit report. More specifically, they desire information that the auditor is required to communicate, to the

Auditors have requirements and public expectations. Auditors are required to have a high level of technical competence, free from bias, and concern for the integrity of financial reports. Once serving the public, the public expects auditors to find fraud, require accounting principles, and be independent from management. It is important for auditors to be independent from the client company, otherwise they will lose public trust. Users believe that an auditor who own shares in a client company might mislead them into believing that the company condition

There was once a group of rebel English barons that went to war to resolve their grievances with King John’s monarchy and the cause of the dispute was a loss of trust in John’s leadership and England’s civic institutions. The resultant Magna Carta peace treaty was hardly a blueprint for a democratic society (PwC). However, it did help a little to enhance the rights and freedoms that would later be incorporated into the democratic society. The Magna Carta then became an enduring symbol of how trust is an important factor to maintain peace in a fully functioning society.

Code of corporate governance ensures the effectiveness of an audit is in the interests of stakeholders and stockholders and that is the reason why they are depending on auditor mostly. An auditor has the power to detect wrongdoings in the management and report on the company objectively. An independent auditor may play their roles effectively and maintain good governance. They can as well remove bias from the company’s financial reports. Though, on the availability and effectiveness of quality auditors, some say that East Asian auditors have insufficient expertise or willingness to supply quality audits. There is also some concern that the auditors’ monitoring role can be in confrontation with their consulting activities with the client firms, an issue not unique in Asia. Also, the disciplinary mechanisms for the auditors may turn to be poor.

The purpose of this paper is to highlight the role of external auditing in promoting good corporate governance. The role of auditors has been emphasized after the pass of the Sarbanes-Oxley Act as a response to the accounting scandal of Enron. Even though auditors are hired and paid by the company, their role is not to represent or act in favor of the company, but to watch and investigate the company’s financials to protect the public from any material misstatements that can affect their decisions. As part of this role, the auditors assess the level of the company’s adherence to its own code of ethics.

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

This article initiates with the introduction on what is audit planning. It basically addresses the audit plan strategy of K & S Corporation limited’s Financial Statements. Being an external auditor of the company, key factors to be considered in auditing the financials of the subject company have been discussed in the article. The most significant accounts at risk being materially misstated have been critically examined citing the possible risks associated with such accounts. Last but not the least, the article concludes with recommendations with respect to audit assessment plan of the company. Hence, this article seeks to act as a ready reckoner guide for an audit manager in audit planning of K & S Corporation Limited.