Aiccob Audit Failure

When an audit engagement team suspects that independence has been lost, the situation should be taken care of immediately to reestablish independence. The definitions and rules presented by the AICPA should be used in accordance with the firm’s independence policies.

The article inspiring this discussion concerns an employee of Ernst & Young in Indonesia violating PCAOB standards. The audit failure was during the audit of an Indonesian telecommunications company. The engagement partner knew of over 4,000 leases that could not be supported by sufficient evidence. When the PCAOB caught wind of the possible audit failure, the engagement team created dozens of new audit work papers. In addition, “During that inspection (by the PCAOB), the engagement

Ernst & Young was also required to pay $1 million dollars in the settlement. Claudius B. Modesti, director of the PCAOB Division of Enforcement and Investigations said, “In their haste to issue audit reports for their client, the firm and two partners shirked their fundamental duty to obtain sufficient audit evidence. Matters were made much worse when EY Indonesia and the engagement partner did not cooperate with the Board’s inspection and investigation (article).” PCAOB is clear that any company, no matter where it is located, that is registered with the PCAOB are held to the standards it creates and enforces. These standards are essential to guarantee that investors can be confident in U.S. public markets. When these standards are violated and then the violators are not cooperating with the investigation, sanctions must be placed. When employees do not comply with the standards required by the governing bodies, the employees are not only ruining the trust