If You Need Love, Get A Puppy 1. PCAOB describes professional skepticism as a general duty of care that needs to be applied by the auditor throughout the duration of the audit engagement. Professional skepticism involves the auditor having a clear and questioning mind regarding the assertions that are presented by management or other client personnel. The auditor is instructed to not take the words or data presented by management as sufficient and appropriate audit evidence but rather the auditor needs to thoroughly audit the evidence with a questioning mind to achieve reasonable assurance about the persuasiveness of the evidence. Skepticism is composed of three elements; auditor attributes, mindset and actions. The PCAOB …show more content…
Will’s independence in fact may be perceived differently by different users. However, Will’s independence in mind seemed to be impaired in this case. He was clearly uncomfortable accusing his best friend’s wife of fraud. Some cases may exist where auditors in similar situations were so uncomfortable that they looked the other way. The factor that plays the greatest role in determining auditor independence is independence in mind. Auditors may or may not appear to be independent, but if the auditor is truly independent in mind, then the auditor can remain objective and unbiased. The profession should consider tightening the Code of Professional Conduct to address the issue of an audit team member knowing a close friend that holds any position at the audit client. If this scenario arises, the firm can still audit the client, but the audit member with the close relationship won’t be able to be on the audit team. 3. The evidence in the case is presented in a manner that leads to a stronger refute to Jessica’s claim that the money had fallen between the cabinets as opposed to supporting her claim. The evidence that would lead to support her claim would be her statement that there could be several explanations as to why the ticket was missing. She originally suggested that the ticket most likely was included with the other cash. After finding the ticket, Jessica states a story of what must have happened was that the
Legitimacy in accounting practices is ensured by the check and balance of having independent auditors from registered public accountant firms reviewing financial practices. The report features eleven sections and these sections pertain to accounting overview, independence of auditors to reduce interest conflicts, corporate responsibility, financial disclosures, tax returns, criminal fraud and various elements of white collar criminal activity (107th Congress
Summary: The objective of this article is to clarify the significance of professional skepticism as an essential part of the auditor’s mindset, and to consider the reasons why approaching an audit with an attitude of professional skepticism is becoming increasingly important. The following are three case studies that will concentrate your consideration on what it takes to be a skeptical auditor when performing journal entry testing.
a first-time in-charge to have a client contact that can help you avoid blowing the budget.
If independence was not viewed as an important issue in the field of auditing then there would not be rules and regulations strictly forbidding it. With the scandals of Enron, WorldCom, Deloitte and Touche, and others it is apparent that not all auditors act in an ethical manner. With the SEC and other organizations cracking down on these issues it will hopefully clean up the image of auditing in the future.
Baseball umpires and auditors are expected to independent. Auditors must not be influenced by clients and baseball umpires cannot root for one team. When I analyzed this situation, my decision whether to lend money or not to TS Company was largely based on how I perceived the audit, whether it was independent or not. Independent auditors help protect public interest and in this situation, my interest as a banker was at stake. My confidence in the TS Company financial statement was based on the independence of the audit. Also, wins or loses do not matter to baseball umpires, their only concern in that everyone abides by the rules of the game; their judgement is not clouded by the outcome of the game. In comparison to this situation, when the business relationship between Mary’s Company and TS Company was not material or significant, I concluded that the unqualified opinion given by Frost & Rubin CPA was “clean” because there was no conflict of interest and like baseball umpires, their loyalty it to the rules and not to a
For any audit engagement APES 110 section 100.5 sets out five fundamental principles that all audit members must abide by (Gay & Simnett 2012, p. 86). They must act with integrity, objectivity and not allow bias. They need to ensure professional competence, confidentiality and comply with the relevant legislation (Gay & Simnett 2012, p. 86). As such one of the principle requirements for auditors is auditor independence from their clients. In Harris-Scarfe’s case, this was not possible because the deputy chairman used to be a partner at Price Waterhouse, the firm’s auditors (Buchanan 2004, p. 69).
According to 0.400 - .21, “independence in appearance is the avoidance of circumstances that would cause a reasonable and informed third party who has knowledge of all relevant information, including the safeguards applied, to reasonably conclude that the integrity, objectivity, or professional skepticism of a firm or member of the attest engagement team is compromised.” The determinant factor to evaluate whether or not an auditor is independent in appearance is to see if there are any conflicts of interest, financial interest, and family influences between the auditor and the client that may impair the auditor’s integrity and
Assign and supervise personnel taking account of the knowledge, skill and ability of the individuals to be given significant engagement responsibilities and the auditor’s assessment of the risks of material misstatement due to fraud for the engagement
In conclusion, audit independence is and will continually be an essential component to credibility to external audit, as a monitoring instrument (Sucher and Bychkova, 2001). It is recommended that audit independence should be justified through its compliance with standards and ethical guidelines. Thus, independent body like APB in UK or ISB in US should be given more accountability to monitor auditors' activities, develop standards or guidelines which are relevant to independence, ensure compliance with standards and conduct investigations or researchs to study areas pertaining to auditor's motivation towards
The question for mandatory audit rotation has been a concern to academics, investors, practitioners and the public at large. This paper is designed to determine the relationship between mandatory audit rotations and audit Independence.
However, the AU-C 230 and AS3, indicate that the auditors, must prepare audit documentation to understand the work performed. So, it enforces the opinion of the financial statement. The AU-C 230 Experienced means that the auditor has skills and can do the audit. Besides the testimony, Ms. Stitt testimony went with the AU- C 230 because she required the documentation record and reviewed it to provide a sufficient a clear understanding of working performed. Also, Audit documentation aims the engagement committee to release the review responsibilities According to the AU-C 200 professional skepticism; means that the auditor has to questions in his mind, and it depends on from auditor to another. So, the auditor considers the fraud. However, this case relevant to the AU-C 300 and AS 10 because the engagement team is involved in the audit. At the end, the responsibility for professional skepticism differs from an auditor to another because of the auditor’s consideration among the engagement team PCAOB No10. However, there are many obstacles to applying the skepticism professional. For instance, the work pressure can result in reduction of the professional
The lack of independence for external auditors will lead to the neglect of auditing risks (William R.K., 2003), which are the main reasons for the failure of certified accountants and professional accounting organizations. The consequence of the external auditors deprived of independence would be very serious. And there are many cases, which aroused by the failure of external auditors and most are related to the lack of independence. One famous example is the bankruptcy of Enron and the role played by its external auditor, Arthur Andersen (Todd, S., 2003). Arthur Andersen was once one of the biggest accounting companies in the world, and was canceled for the involvement in the Enron bankruptcy scandal.
audit standards discuss auditors’ responsibility to exercise increased professional skepticism in response to specific situations. Confirmation procedures are one circumstances where an evaluator needs to practice an increased level of expert in professional skepticism. AU Section 330.37
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
To permit maintenance of an independent and objective mental attitude necessary in rendering reports, all internal audit activities will remain free of influence by any element in the organization. This freedom from influence includes matters of audit selection, scope, procedures, frequency, timing, or report content. Internal Auditors will perform their duties in such a manner that they believe in their work product and that no audit quality compromises are made. Internal Auditors may not subordinate judgment related to their audit duties to anyone.