How the Role of an Audit Firm has Expanded Over Time

In order “to offer high-quality accounting services”, Arthur Andersen (AA), a Northwestern accounting professor started a business to offer services to clients promoting “integrity and sound audit opinions over higher short-run profits”. The company’s “four cornerstones” was good service, quality audits, well-managed staff, and profits for the firm. Their strategy was to focus on quality and high standards of audits rather than profits, a very successful strategy that led to consistent growth over the years.

According to Granof, “attestation engagements cover a broader scope of engagements than financial audits” (Granof, 2013). Attestation engagements examine, review, and/or preform agreed-upon procedures as to various types of subject matters or management assertions. The may include the following:

The ASB previously had responsibility for establishing auditing standards for both public and private companies. Existing auditing standards were adopted by the PCAOB as interim auditing standards for public company audits.

The audit will become a strong tool for feeding a continual improvement method and providing recognition for excellence in any organization. Eminent implementation of AN audit method needs managers to line positive expectations concerning however audits are going to be conducted, choose vital areas for audits, give positive communication concerning the aim of the audit findings, and involve individuals in following informed the audit findings. The audit ought to be seen as a way for distinctive each opportunities for improvement and areas of excellence that merit reward and recognition.

5) The auditor exercises professional judgment when making the decision to accept a new client or to continue serving an existing client. To aid in making the judgment, auditing firms apply prescribed procedures to the potential client. Of the procedures, perhaps the most important deals with the integrity of management. The auditor 's business risk associated with a management that lacks integrity is difficult to overcome. Despite auditor 's business risk being high, an acceptable engagement risk may still be achieved. Audit risk can be adjusted such that the combination of entity 's business risk, audit risk, and auditor 's business risk yields an engagement risk that is sufficiently low. However, if management lacks integrity, adjusting the nature, timing, and extent of audit procedures performed on management assertions may not produce an acceptably low audit risk. In making a decision to continue a client, the

According to (Grant Gay, 2012) “International Auditing and Assurance Standards Board (IAAB) works to improve the uniformity of auditing practices & related services throughout the world by publishing proclamation on a variety of audit and assurance functions and by promoting their approval worldwide”.

Nowadays, more and more attention has been paid on internal auditing. Drawing the lessons from the scandal of Enron, Enron allowed an external accounting firm to take charge of company’s internal audit function, and consequently

Arens, A. A., Elder, R.J., & Beasley, M.S. (2012). Auditing and assurance services: An integrated approach (14th Ed.). New York, New York: Pearson.

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

Before SOX was established, the public trusted and depend the auditors wholly for the publicly-traded companies to accurately complete audits of the companies’ financial statements which they relied upon in making investment decisions. The accounting and auditing industry was self-regulated (Cunningham & Harris, 2006). Company managers had little accountability when accounting and auditing problems arose. Everything was changed after there were many high-profile cases of accounting fraud, particularly the scandals of Enron and WorldCom in the early 2000s. Each of these frauds caused massive losses to investors of the companies and the public lost confidence in securities of US market. Following these series of failures, SOX was enacted to restore investor’s confidence which was rattled and to prevent accounting frauds in the future with improved corporate governance and accountability which all public companies must comply. SOX was named after Senator Paul Sarbanes and Representative Michael G. Oxley, who were the main drafters of the Act. It was approved by the House of Representatives and signed into law by the President George W. Bush on July 30, 2003. Lack of ethics and integrity seem to be the key factors that caused accounting fraud. SOX revised the framework for the public accounting and auditing profession, provides guidance for better corporate governance and create regulations to define how public companies are to comply with the law. Although many have questioned

Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria (Pearson, 2014). The external auditors auditing client’s accounting records are qualified accountants who express true and fair vies as to whether the financial statements are present in accordance with the relevant accounting standards such as International financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). We auditors are accountable for the financial statements to be free from material misstatement, fraud or error. As auditors of Petrol One Resources Berhad, an Oil & Gas industry service

An auditor is requested to convey an opinion on whether the financial statements are fairly stated, be it through a voluntary audit or a statutory audit. Before embarking on an audit of the financial statements the auditor is obligated to follow certain steps; this is called the Audit Process. The Audit Process allows the auditor to perform a high level service to the client, ensure that the auditor complies with the auditing standards and limits the auditor’s risk of legal liability or reputational damage. The audit process is subdivided into four phases which is:

Louwers, T. J., Ramsay, R., Sinason, D., & Strawser, J. (2007). Auditing and assurance services:

This survey was conducted of two groups: first group was represented by internal audit directors, and the second group was formed by staff auditors who work directly which external auditors. Both groups were asked to evaluate the overall performance of their organization’s external auditor and their perceived relationship with the external auditor. Next, we present the main results obtained through this survey: ♦ 92% from internal audit directors appreciated that external auditors make full use of the expertise of the internal audit staff; ♦ 50% of internal audit directors perceived that relationship between internal audit and external audit is an “excellent” one, while 31% appreciate this relationship as “good”; ♦ Staff auditors differed substantially in their perceptions of the external auditors’ of the internal auditor’s expertise. Only 39% of staff auditors considered that the external auditors fully utilized their expertise; ♦ Starting from the statement of Morris N. (Morris N., 1981) that “the external audit firm has the ear of the board of directors and, where one is established, the audit committee. Internal auditors do not have the same relationship”, Peacock E. and Pelfrey S. wanted to identify the relationship between internal audit and audit committee. From this point of view, more that 80% of the respondent directors of their study indicated that their companies have an audit committee, and that the internal audit

All over the world there is a realization that the Internal Audit activity has the potential to provide hitherto unparalleled services to management in the conduct of their duties. This potential has been turned into a challenge and embodied in the new definition of Internal Auditing from the Institute of Internal Auditors (the IIA).