Current Research Synthesis And Implications Essay

Question:

Discuss about the Current Research Synthesis and Implications.

Answer:

Introduction:

An auditor plays a major role in providing a true and fair view of the organization. Hence, the auditor must ensure that the conduct must be done in a fair manner that should not be influenced by any external or internal factors. The audited statements are continuously needed by various parties and in the event of any misconduct or problem, the auditor is responsible to the third parties. When it comes to the process of auditing, there is no respite for fraud or mistake. In the case study, it is observed that King and Queen function as an auditor for Impulse since the time of inception. The company was facing acute problems, as well as difficulties in terms of liquidity and it is the duty of the auditing to consider this situation and provide a report that is unqualified (Carcello, 2012). Therefore, it is the responsibility of the auditor to assess the financial statements and provide a clear picture so that the third parties get clear information. In this scenario, EFL provided the loan to the company based on the report provided by the auditor. There was a severe liquidity crunch yet the auditor provided an unqualified report. EFL acted on the report and provided the report. Therefore, in all probability, the loan can become unrecoverable and the auditor will be held liable for it. This is evident that the act of King and Queen led to the problem. Similar instances were observed in the case of Deloitte, Enron, etc where the auditor failed to perform the duty diligently. In such cases auditor has to face the wrath of heavy penalties because all acts were done considering the audited reports.
The audit process depends entirely on the concept of diligence and an auditor needs to perform the duties without any external influences. This leads to a quality form of audit. Hence, a similar stand needs to be noted when it comes to King and Queen. They are bound to perform the duty considering an ethical stand. They need to consider the fraud or error that comes in the way and must keep a note of it in the audited statement so that it comes to the forefront. If such matters are concealed it might lead to irregularities and the entire concept of audit might fail (Bedard et. al, 2014). Therefore, before taking any decision, the related parties might conduct an analysis of his own. If EFL had provided a written note to the auditors about the provision of loan to Impulse then the responsibility of the auditors would have increased to a great extent. However, the auditor is not free from constraint as the audited statements were provided King and Queen (Wright & Charles, 2015). There were aware of the liquidity crunch yet they concealed the fact and depending on the report, EFL provided the loan. Hence, they are guilty of this act and responsible to EFL. Hence, it is a clear cut indication that auditor is responsible to the third parties if the fault is done by them.
The independence of an auditor signifies the freedom from the parties those who are related to the business. Hence, it is imperative that the auditor needs to be free from any type of influences that poses a threat to the independent decision. Moreover, the conduct of the process should be in such a manner that adheres to the principles of audit and signifies honesty, as well as integrity (Blay et. al, 2011).

Actual independence considers only the aspects of accounts and is, therefore, simple in the feature. Its benefit is that it helps the auditor to provide a true and fair view of the affairs. Hence, the audited statement is concrete and authentic. It gets distorted when it is management with various other fees or any other personal payment. On the contrary, perceived independence stress on the link between the client, and an auditor. Moreover, it gets an insight that whether the auditor has an independent status or not (Holland & Lane, 2012). Therefore, it is a strong tool to assess that whether the report is authentic or not. For the audit to be successful it is essential that both the audit process need to be into practice.

The financial details of Club Casino were used by its auditor Bob to perform the function of the audit. In this case, it needs to be noted that the important information is used by the auditor without any approval or permission and hence, is n contravention of the regulations laid down by CCI (Tepalagul & Linn, 2015). The auditor must not share any details of the client because if the client provides in writing the non-disclosure of specific information then the auditor will land in difficulty.

As per the case, Wendy acted as an engagement partner in Ace Ltd years back and performed secretarial duties for 6 months. However, as per the provision of the companies act, an auditor who is appointed for the audit work cannot perform secretarial duties as this goes against the law (Mock et. al, 2013).

The mentioned case relates to the independence of the auditor and stresses on the non-audit services provided by the auditor. This is because a sense of personal touch and familiarity can develop thereby leading to disruption in the process of decision-making (Church et. al, 2008). Therefore, it is imperative that any material link exists between the auditor and the external parties, the result is impacted in a negative manner.

In the present case, the auditor’s professional morality is highlighted. The problem of self –interest can be witnessed as Chan and Associates obtained Classic Reproductions Pvt. Ltd furniture. A stake of 25% was provided by the auditor in a company that is unassociated in nature as thanksgiving. The furniture appeared to be half of the balance that is left over. Hence, the fees of the audit should not exceed the fee in actual as financial interest can affect the opinion of the audit thereby heading towards bigger problems and the decisions get disrupted (Coram et. al, 2011). It is thereby important that the auditor should be free from all sort of financial interest otherwise, it affects the quality of the audit and leads to an immense problem for the organization. Hence, in all scenarios, there must be a strong line of difference that separates the auditor and the parties who are interested.

References

Bedard, J., N., Gonthier, B, & A. Schatt. (2014). Costs and Benefits of Reporting Key, Harvard Press

Blay, A. D., Geiger, M. A. & North, D. S. ( 2011). The Auditor's Going-Concern Opinion as a Communication of Risk. Auditing: A Journal of Practice & Theory, 30 (2): 77- 102.

Carcello, J. (2012). What do investors want from the standard audit report? CPA Journal 82 (1), 7.

Church, B., Davis, S. & McCracken, S. (2008). The auditor’s reporting model: A literature overview and research synthesis. Accounting Horizons, 22(1), 69-90.

Coram, P., Mock, T. J., Turner, J. & Gray, G. (2011). The communicative value of the auditor’s report. Australian Accounting Review 21(3), 235-252.

Holland, K. & Lane, J. (2012). Perceived auditor independence and audit firm fees’, Accounting and Business Research. 42(2), 115-141.

Mock, T. J., B?dard, J., Coram, P., Davis, S., Espahbodi, R. & Warne, R. (2013). The audit reporting model: Current research synthesis and implications. Auditing: A Journal of Practice and Theory, 32, 323-351.

Tepalagul, N. & Lin, L. (2015). Auditor Independence and Audit Quality A Literature Review’, Journal of Accounting, Auditing & Finance, 30(1), 101-121.

Wright, M.K. & Charles, J. (2012). Auditor independence and internal information systems audit quality, Business Studies Journal. 4(2), 63-84.

How to cite this essay: