The Role of Auditors in Delivering Fault-Free Information
Times have changed and so did the overall structure of the business which has also made the role of the auditors to be altered. The target of an auditor is to deliver fault free information to the customers and to see that no loophole prevails in the analyzing system. Strategic changes are required to keep the quality of the audit intact. However, the profession of auditor is not free from challenges. Considering the challenges, there has been various regulatory changes that aims to instills stability.
The main work of the auditor is to report the occurrence of frauds in the business. It can be said that India has made this as a secondary aim of the auditor while Australia has a strict policy which has to be catered with. Australian Auditing Guidelines says that if any fraudulent case is linked with any senior member of the company then the auditor must report the same to the management or to its client for prevention of any further manipulative work in the business (Cappelleto, 2010).
The assumable difference that people see as auditor work to the work that actually an auditor has to do is termed as the audit expectation gap. The work is not at all same as thought by the public. Two core reasons are there because of which the gap seems to exist. The primary target of detection and elimination of manipulative and fraudulent work has been seen to widen this gap very much (Livne, 2015). Secondly, there is no perfect knowledge of the auditing framework even after sessions of discussion and argument on the respected matter. It is to be seen that the duty of the auditor is to distribute relevant information and the financial report made by the auditors are analyzed first if a company collapses and then charging the auditor with governance is a matter that should be reanalyzed upon again. Also, techniques should be undertaken to instill knowledge in the public.
ASIC had to make some major changes in the powers of the auditors in 2012 in association with the Corporations Legislation Amendment Act 2012. The Act was also seen to put down an option of Strategic Review as per the request of the Treasury. The statements provided by the Treasury says that the Australian government has put down the best auditing rules and standards which are best in nature and so no changes are required in the same. The changes in the auditing sector associated with power under ASIC are:
Challenges Faced by Auditors
Annual transparency reports- it was stated that the auditing firms which are holding audits of 10 or more than 10 companies simultaneously must present their Annual Transparency report to the public at all costs. These companies can include:
- Listed companies.
- Legal deposit-taking enterprises.
- On the chart legal schemes, and
- Insurance companies.
Independent function of the Auditor- The terms which defined the independence of the auditor was erased and new laws were formulated which would work under the ASIC and the FRC. To cater with the quality of audit work it was seen that the auditing bodies including the Minister would be presented with appropriate legal advice so that all the work will be in accordance with the terms set up by the ASIC and the FRC.
Audit deficiency notifications and reports- The ASIC has the power to issue a report termed as the Audit deficiency notifications and reports which is delivered to auditing firms in a case where the ASIC finds that the firm has failed to work on its duty as per the rules and regulation prescribed for auditing. In such cases, the reports are stated with the fact that the particular firm is poor in working and has disrupted the quality of the presented auditing report (Sikka, 2009).
Alterations in business structure and market also change the standards of the auditing profession. Companies are now laying more emphasis on the financial statements and their presentation. Utilizing the technological services in association with the auditing skills and professionalism can be a boon to the company as a whole. This will make the decision taking summits easier and with increased revenue generation (Lapsley, 2012). If the above-mentioned measures are followed then the accumulation of data will be huge and strict working will be required. Only hard work will not be enough as this data will have to be stored which would require humungous storage area divided into different segments as the accumulated data will be in different formats like pdf files, images, texts, audio, video and many more (Niemi & Sundgren, 2012). All these if followed thoroughly can flourish the company well but the terms set up in the audit are not capable to exist with such statements and so is the reason that many auditing firms have received reports about their disrupted quality of auditing (Geoffrey et. al, 2016). The fact that the firms are not able to cater to the wants of the clients can get them stripped of their work with contract cancellation.
Understanding the business type, catering to the field and making picture perfect plans to eliminate the loopholes are some of the terms that must be added to the existing auditing sequences. The atmosphere of the working must also be taken into consideration. Working systems should be analyzed so that it is assured that they are in place for the detection of material misstatements along with an analysis of internal measures followed by the company (Tadros, 2017). Analytical procedures must be straight and effective which can be done by keeping the substantive features in place which also requires the test of ending balances to be done on a timely basis.
Conclusion
The accounting industry must innovate and create new methods which would increase the auditing standards in the upcoming times. The auditor and the company management are the ones on which the auditing quality depends. The auditors need to get familiar with the business of the client so that all the work done is as per the standard rules. Reports are bound to be prepared as per the Clarified accounting International Standards and so the cost has been seemingly rising enough. All these circumstances have led to a periodic reanalysis of the auditing standards so that the firm can work properly and deliver fault free reports for the sake of decision making of the public customers.
References
Cappelleto, G. (2010) Challenges Facing Accounting Education in Australia. AFAANZ, Melbourne
Geoffrey D. B., Joleen K., K. K.S., and David A. W. (2016). Attracting Applicants for In-House and Outsourced Internal Audit Positions: Views from External Auditors. Accounting Horizons, 30(1), 143-156. https://doi.org/10.2308/acch-51309
Lapsley, I. (2012). Commentary: Financial Accountability & Management. Qualitative Research in Accounting & Management, 9(3), pp. 291-292. https://doi.org/10.1111/1468-0408.00081
Livne, G. (2015, May 18). Threats to Auditor Independence and Possible Remedies. Retrieved from: https://www.financepractitioner.com/auditing-best-practice/threats-to-auditor-independence-and-possible-remedies?full
Tadros, E. (2017) Appalling’ audit quality could lead to next Enron: ASIC’s Greg Medcraft [online]. Available from: https://www.afr.com/business/accounting/appalling-audit-quality-could-lead-to-next-enron-asics-greg-medcraft-20171030-gzb5q2#ixzz5BrDh3Ckohttps://www.ifac.org/global-knowledge-gateway/technology/discussion/why-accountants-must-embrace-machine-learning [Accessed 16 May 2018]Sikka, P. (2009) Financial Crisis and the Silence of Auditors. Accounting Organizations and Society. [online]. 34(7), p. 868-873. Available from: DOI: 10.1016/j.aos.2009.01.004
Niemi, L., and Sundgren, S. (2012). Are modified audit opinions related to the availability of credit? Evidence from Finnish SMEs. European Accounting Review, 21(4), 767-796. https://doi.org/10.1080/09638180.2012.671465
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