The Importance Of A Good Engagement At Cal Poly Slo And Future Pwc Auditor

- The client may have had an issue with the predecessor auditor and this could be the reason for the switch. The client may not want the successor auditor knowing of the past audits for several reasons. An unqualified opinion may have been accessed by the successor that the client did not agree with. The client may not want this to happen so they switched auditors to try and gain a qualified opinion. Also, the client may want to start fresh with a new firm and receive a completely new opinion to ensure that their financial statements are still assuredly presented in a qualified manner.

While there would be advantages to allowing auditors to provide nonaudit services to their clients, there are also some disadvantages. One main disadvantage to having an auditor provide nonaudit services is that it makes it more difficult to maintain independence from the company. If an auditor of a company provides nonaudit services to the same company there could be the appearance of a lack of independence. Since independence is one of the most important factors to maintain as an auditor, it becomes very essential to preserve this aspect of the auditing services that are being provided. Also, a disadvantage is that it makes it more difficult for oversight of these engagements because the different services being provided could become unclear to an oversight board. When an auditor also provides different services to the same company that it is auditing, it becomes more and more

Preliminary analysis to understand the client‘s business and risk - Understanding the auditee’s business, environment, and risks

Auditor independence and a prohibition on audit firms offering value-added (read "conflict of interest") services

Auditing firms are no longer able to focus primarily on selling additional services. Instead, they are now concerned with providing excellent service to the client. This has resulted in additional tax and financial reporting

Under audit planning, the auditor decides whether to accept a new client or continue serving an existing one. This determination is

The architectural design of a firm varies greatly. In 1950, the business environment of Arthur Andersen included using the computer effectively for automated bookkeeping. Structure and regulation of the markets, helped Arthur Andersen to develop into a well-respected and reputable auditing company. The federal law in the 1930s requiring companies to turn over their financial statements yearly to an independent auditor not only strengthened Arthur Andersen, but also helped with their impeccable reputation. Arthur Andersen’s strategy included quality audits with a well-managed staff and profits. Promotions and rewards were plentiful when auditors made sound auditing decisions. In the 1990s, Arthur Andersen’s organizational architecture and strategy focused on generating new business, cost cutting, and performance evaluations along with decision rights over its business (Brickley, Smith, & Zimmerman, 2009).

4) What factors in the auditor-client relationship create a power imbalance in favor of the client? Discuss measures that the profession could take to minimize the negative consequences of this power imbalance.

Thank you for your interesting write up and highlighting the important part of ethical behavior between client and consultant. However, I believe that in most client-consultant relationship several unethical practices might occurs from both parties, and this is where communications play the major role to be able to work on improving such practice and turn it to ethical practice, rather that declining participation.

The auditor’s responsibility is not to evaluate a client’s business model but to have a sufficient understanding of the entity. An auditor needs a sound and comprehensive understanding of the client’s business and industry to develop valid expectations about financial-statement assertions.

2. A) A client can be put in a more powerful position than the auditor in an auditor-client relationship if the auditor is trying to sell the client additional services.

Read and summarize the article, "Client Engagement Risks and the Auditor Search Period," by Khalil, Cohen, and Schwartz in Accounting Horizons, Volume 25, Number 4 (2011), pp. 685 - 702.

Internal auditors cannot effectively provide an analysis on the company’s internal dealings as they are part of the company. External auditors, however, can observe these processes from the outside and then determine where the funds of the company and whether the dealings adhere to the regulations. Using external auditors in a company prevents conflict of interest from happening. Conflict of interest is a situation where an individual or organization has multiple interests and of those multiple interests, one could possible corrupt the motivation for an act on the other when the auditor has any kind of beneficial interest in their client’s performance. In other circumstances, there is also the threat of familiarity where auditors become

If the external auditors cannot maintain their independence in their service, the clients will lose their interests in the auditing service, and the external auditors will lose their source of revenue.

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