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The importance of independence for auditors
The importance of independence for auditors
Why is independence important in auditing
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An effective relationship businesses and stakeholders is driven by the confidence of each other. Using assurance providers service will, if reasonable, strength this relationship. However, their role is sometimes not clear for the stakeholders. The term assurance, its benefits to businesses, how independence is maintain and the effect of the ISA 700 revision on the expectation gap will be the four focus points of this report
In an assurance engagement, the practitioner expresses a conclusion designed to enhance the intended users’ degree of confidence about the outcome of an evaluation of measurement of a subject matter against specified criteria (ICAEW, 2013). In addition, the key elements of an assurance engagement are: a three party relationship (the practitioner, the intended users, the responsible party), a subject matter (data, systems or processes, behaviour), suitable criteria, sufficient appropriate evidence to support the assurance opinion and an assurance report (ICAEW, 2013).
Moreover, the definition given above is issued by the IFAC whose objective is to protect the public interest; therefore, to incite higher quality it has introduced two types of assurance engagement (ICAEW, 2013):
- Reasonable assurance: A high level of assurance, in which the auditor will express a conclusion designed to enhance the degree of confidence of the intended users of the financial statements, that engagement risk has been reduced to an acceptably low level, as the basis for a conclusion to be expressed positively.
- Limited assurance: the objective of a limited assurance engagement is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, which then allows a negative form of expres...
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...rinciples-based meanwhile avoiding possible threats but all theses factors at the end are affecting the final judgment. In my opinion, reworking on the ideology of independence could be a solution, which would narrow the expectation gap, and improve the auditing profession.
Bibliography
A. Gold, U. Gronewold, C. Pott. "http://www.ifac.org/sites/default/files/downloads/Study_4_ASB_ResearchReport.pdf." 2009.
Cotterill, Joseph. Groupon in accounting mess shocker. 30 March 2012. 17 November 2013 .
Financial Reporting Council. International Standard on Auditing (UK and Ireland) 700. 01 June 2013. 17 November 2013 .
ICAEW. ASSURANCE (STUDY MANUAL). 2014.
Due to this, the confirmation process has become of high risk. Third party intermediaries have been established to assist in this process by securely transmitting information to the bank and validating the authenticity of the respondent. The use of third-party intermediaries makes it more difficult for anyone to alter confirmation requests. There are risks that come with the use of third party intermediaries because the intermediary’s control weaknesses or deficiencies fall on the auditors as well when relying on confirmations received through them. Auditors must assess that the intermediary’s system of internal control has been designed and is operating effectively to meet the PCAOB
Arens, Alvin A., Elder, Randall J., and Beasley, Mark S. (2012). Auditing and Assurance Services:
Integrity which is demonstrated by acceptance in decision making, having honest communication and activities with ethical practices that demand trust and support
Rittenberg, Larry, Bradley Schwieger, and Karla Johnstone. Auditing. 6th ed. Mason: Thomas South-Western, 2005. 10-40.
The independence of mind or independence in fact means Betty has to have a state of mind that allow her to form an opinion without bias due to influence that compromises professional judgment. By having an independence of mind allowing an individual to perform his or her audit work with integrity, as well as, maintaining her objectivity and professional skepticism behavior. However, in this case, she did not have an independence of mind since she trusted Toby and she enjoyed working with him since he is also a CPA because it is easy for her to work with him compare to her other clients who do not have the accounting background. As a result, because of long-term relationship and trust that Betty has with Toby, it influenced her decision about the audit opinion. Additionally, to be independent in appearance Betty and her audit team must show unbiased professional judgment when she reviews her clients ' financial statements. Betty had Problems with independence in appearance because in the case study shown me that she has become too close to her client, Toby. Therefore, all auditors have to maintain their professional skepticism as well as maintain independence in their mental attitude and also independence in appearance to provide an unbiased opinion on
...ial approaches which are Normal Accident and HROs, although it seems certain that both of them tends to limit the progression that can contribute toward achieving to highly protective systems. This is because the scope of the problems is too narrow and the potential of the solutions is too limited as well. Hence, Laporte and Consolini et.al., (1991) as cited in Marais, et.al., (2004) conclude that the most interesting feature of the high reliability organization is to prioritize both performance and security by the managerial oversight. In addition, the goal agreement must be an official announcement. In essence, it is recommended that there is a continuing need in the high risk organizations for more awareness of developing security system and high reliability environment in order to gain highly successful method to lower risk in an advance technology system.
Olusegun Wallace, R. 1996. The Development of Accounting Research in the UK. In: Cooke, T. and Nobes, C. eds. 1997. The Development of Accounting in an International Context. London: Routledge, pp. 218-254.
in making sure the correct methods are followed out with regards to health, safety, hygiene matters;
...e steps that are required to be addressed while coming to deal with vendors. The Proposed idea, looks satisfactory in meeting the outcomes. One thing that should be ensured is that they should incorporate the clauses pertaining to risk in the plan.
Various definitions have been proposed for the audit expectation gap. Humphrey, Moizer and Turley (1992), suggest that the common element in the various definitions of the gap is that auditors are performing in a manner that is at variance with the beliefs and desires of others who are party to or interested in the audit.
In this approach, the focus will be on the internal control objectives so that the control design can be well assessed. First, the auditor will define the control measures and objectives and then find out which measures already installed meet the objectives (Tyrer, 1994).
Potentially tolerable risks may be acceptable, depending on the “cost of implementing the control compared to the risk reduction benefit received” (IRM, 2010).
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.
This paper will first look at the need for such measures and present the current standards employed at companies. Then we will present case studies on incidents that were high-profile examples of failure in this area. The paper will then come up a more effective implementation
Abstract-Contract is a self-agreed, enforceable by law and deliberate agreement between two or more competent authority and parties. Contracts are made in written but may be implied or spoken, and generally have to do with another organization, employment, sale or lease, or tenancy. We assume service engagement is a part of business events. Business events such as payments, purchase, sells, delivery etc. not only impotent processes but are also inherently temporally constrained. Analysis phase is carried out to find out business event and their temporal relationships which helps business partners to analyze what to supply and what to require from others as its participates in the service engagement specified by a contract. Contracts are