Week 10 Auditing Issues
Auditing Issues - TR Week 10 Most people have the same feeling when they hear the word audit. It usually implements fear in a person, even though that person may have done nothing wrong. Fear is common when the auditors are being brought in because most people don 't know what to expect. This is also true when audits are being done for businesses. I know from personal experience that the auditors are not always greeter with kindness. I currently working in an accounting firm and have had the privilege to go on audits with my company even though I do not yet have my degree. People need to understand that the auditors do not need to be fear but need to be respected for what they are doing. It is not an auditors goal to ruin someone
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or a company. It is there job to make sure people are following the rules and standards that are put in place for everyone. In my paper I plan to discuss some of the common auditing issues the world is facing today.
I do not want to just focus on one auditing issue because there are so many that can lead to big problems for a company. The following will be the top five issues I have found while doing my research on auditing issues. The first issue I would like to discuss is the gathering of sufficient audit evidence during the audit process. One of the reasons that gathering evidence is so important is because it backs up the information that a company or an individual is supplying the auditor. This is one way the auditors get their information. This being the case it means that the auditors need to question management when they might see a deficiency in any of the accounting materials. If they do not question the materials then they are not fully performing their job. (Beasley, Carcello, & Hermanson, 2001) In an article written by Kathleen Hoffelder 87 cases where the SEC was investigating fraud, 73 percent of those cases did not have sufficient audit evidence. These cased were pulled from 1998 to 2010. One of the interesting things about this study is that only 11 of the 87 cases that were studied happened after 2003. The reason that this is interesting is because a little over a year earlier was when Sarbanes Oxley was put into effect. This helps to show that SOX is a process that is starting to work. It is showing that more auditors are taking the time and care needed to properly …show more content…
evaluate these companies. (Hoffelder, 2013) In all the research I did on this topic not gathering sufficient evidence was ranked among the top issues in almost all of the reports. The next issue that comes in a little because sufficient evidence is, due professional care. In Hoffelders article it was discussed that of the 87 cases researched 67 percent had due professional care issues. (Hoffelder, 2013) Due professional care can roughly be defined many different ways, such as how an auditor conducts themselves during an audit, the images that is reflected from the auditor to the client, or it is the expectation of adding value by giving solutions to the client instead of problems. (ISACA, 2013) There are certain factors that exist in due professional care, such as, auditor conduct or communications.
There are many factors that are going to affect the due professional care on both the auditors end and the clients side. For example, the auditors conduct can play a big role. If the auditor goes in with the attitude that they are going to find a problem within the company it is going to cause the clients to be uneasy during the process which could make them unresponsive towards the auditor and could make them less receptive toward any of the recommendations that the auditor way give. It 's also important because most of the time the auditor 's report will include notes about how the client acted toward recommendations that may have been given. They are not trying to hurt the company the auditors are trying to help. That 's why it is important for the auditor conduct to remain professional and unbiased. (ISACA,
2013) The third top issue on the list is the level of professional skepticism. Out of the 87 case 67 percent of those cases had an insufficient level of professional skepticism. (Hoffelder, 2013) Professional skepticism is the attitude that includes a questioning mind and critical assessment of audit evidence. ( Accounting Concern, 2013) To simplify this it means that the auditors needs to go in with the mind set of asking questions and to make sure assessments are done on all evidence. The auditor should not try to decide if anyone in the company is honest or dishonest. That doesn 't matter in this part of the audit. When using professional skepticism you need to be alert as an auditor. That means that the auditors need to make sure that if there is any questionable information they are properly investigating it to find the source of the problem. The reason this is important is because it could just be a simple error or it could be that someone is committing fraud. Being alert is one of the most important aspects when a person is using professional skepticism. (AUASB, 2012) The forth issues that was found during the research of the 87 cases was that 54 percent failed to get adequate evidence related to management representation. (Hoffelder, 2013) This means that many of the auditors did not get the proper management representation that they needed during the audit. This subject has an entire area that breaks down what exactly the auditor is suppose to get from management and what they are suppose to do with that information, since it is part of the audit process. It provides guidance to the auditor concerning the representation that is to be gained. For example if an auditor is having troubles with some of the information they have received they can go to management to get a clearer view of what an item is representing. This information doesn 't take the place of anything the auditor has gathered but is suppose to help the auditor find the proper evidence that is needed for the audit. (AICPA, 2013) This information is important because if management does not supply that information or the information is being changed it could show that there are some wrong doings going on within the company. Management should not be withholding any information, especially if it is information the auditors is specifically requesting in order to properly evaluate the company. The last area that needs to be discussed to complete my top five auditing issues is the failure to express and appropriate audit opinion. (Hoffelder, 2013) There are three different types of audit opinions, unqualified, qualified, or adverse. The reason there are three is because there each represent a different level the auditor feels was accomplished by doing the audit. A unqualified opinions means that the company is in good shape and that there were no serious issues and that all the information is accurate. A qualified opinion means that there could be some issues but does not necessarily mean that the company is doing something wrong it just means the auditor was not able to get all the proper information that was need to properly perform the audit. The adverse opinion means that the company has serious problems. This could be something like the auditor finding fraud within the companies records. (For Dummies, 2013) The reason this is so important is because it shows how the company is doing if the information is not disclosed then the proper information isn 't getting out and that reflects on the auditors. This information is important to the shareholders and anyone who may be interested in the company.
References:
Accounting Concern. (2013). Professional Skepticism. Retrieved from Accounting Concern: http://www.accountingconcern.com/accounting-dictionary/professional-skepticism/
AICPA. (2013). AU Section 333; Management Representations. Retrieved from AICPA: http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00333.pdf
AUASB. (2012, August ). Professional Scepticism in an Audit of Financial Report. Retrieved from AUASB Bulletin: http://www.auasb.gov.au/admin/file/content102/c3/Aug12_AUASB_Bulletin_Professional_Scepticism_in_an_Audit_of_a_Financial_Report.pdf
Beasley, M. S., Carcello, J. V., & Hermanson, D. R. (2001, April). Top 10 Audit Deficiencies. Retrieved from Journal of Accountancy: http://www.journalofaccountancy.com/Issues/2001/Apr/Top10AuditDeficiencies
For Dummies. (2013). What 's in an Auditor’s Report: Opinions, Good and Bad. Retrieved from Dummies.com: http://www.dummies.com/how-to/content/whats-in-an-auditors-report-opinions-good-and-bad.html
Hoffelder, K. (2013, May 10). Top Audit Deficiency: Evidence Collection. Retrieved from CFO: http://www3.cfo.com/article/2013/5/auditing_audit-sec-sarbanes-oxley-caq-
ISACA. (2013). Due Professional Care. Retrieved from ISACA: ISACA
or a company. It is there job to make sure people are following the rules and standards that are put in place for everyone. In my paper I plan to discuss some of the common auditing issues the world is facing today.
I do not want to just focus on one auditing issue because there are so many that can lead to big problems for a company. The following will be the top five issues I have found while doing my research on auditing issues. The first issue I would like to discuss is the gathering of sufficient audit evidence during the audit process. One of the reasons that gathering evidence is so important is because it backs up the information that a company or an individual is supplying the auditor. This is one way the auditors get their information. This being the case it means that the auditors need to question management when they might see a deficiency in any of the accounting materials. If they do not question the materials then they are not fully performing their job. (Beasley, Carcello, & Hermanson, 2001) In an article written by Kathleen Hoffelder 87 cases where the SEC was investigating fraud, 73 percent of those cases did not have sufficient audit evidence. These cased were pulled from 1998 to 2010. One of the interesting things about this study is that only 11 of the 87 cases that were studied happened after 2003. The reason that this is interesting is because a little over a year earlier was when Sarbanes Oxley was put into effect. This helps to show that SOX is a process that is starting to work. It is showing that more auditors are taking the time and care needed to properly …show more content…
evaluate these companies. (Hoffelder, 2013) In all the research I did on this topic not gathering sufficient evidence was ranked among the top issues in almost all of the reports. The next issue that comes in a little because sufficient evidence is, due professional care. In Hoffelders article it was discussed that of the 87 cases researched 67 percent had due professional care issues. (Hoffelder, 2013) Due professional care can roughly be defined many different ways, such as how an auditor conducts themselves during an audit, the images that is reflected from the auditor to the client, or it is the expectation of adding value by giving solutions to the client instead of problems. (ISACA, 2013) There are certain factors that exist in due professional care, such as, auditor conduct or communications.
There are many factors that are going to affect the due professional care on both the auditors end and the clients side. For example, the auditors conduct can play a big role. If the auditor goes in with the attitude that they are going to find a problem within the company it is going to cause the clients to be uneasy during the process which could make them unresponsive towards the auditor and could make them less receptive toward any of the recommendations that the auditor way give. It 's also important because most of the time the auditor 's report will include notes about how the client acted toward recommendations that may have been given. They are not trying to hurt the company the auditors are trying to help. That 's why it is important for the auditor conduct to remain professional and unbiased. (ISACA,
2013) The third top issue on the list is the level of professional skepticism. Out of the 87 case 67 percent of those cases had an insufficient level of professional skepticism. (Hoffelder, 2013) Professional skepticism is the attitude that includes a questioning mind and critical assessment of audit evidence. ( Accounting Concern, 2013) To simplify this it means that the auditors needs to go in with the mind set of asking questions and to make sure assessments are done on all evidence. The auditor should not try to decide if anyone in the company is honest or dishonest. That doesn 't matter in this part of the audit. When using professional skepticism you need to be alert as an auditor. That means that the auditors need to make sure that if there is any questionable information they are properly investigating it to find the source of the problem. The reason this is important is because it could just be a simple error or it could be that someone is committing fraud. Being alert is one of the most important aspects when a person is using professional skepticism. (AUASB, 2012) The forth issues that was found during the research of the 87 cases was that 54 percent failed to get adequate evidence related to management representation. (Hoffelder, 2013) This means that many of the auditors did not get the proper management representation that they needed during the audit. This subject has an entire area that breaks down what exactly the auditor is suppose to get from management and what they are suppose to do with that information, since it is part of the audit process. It provides guidance to the auditor concerning the representation that is to be gained. For example if an auditor is having troubles with some of the information they have received they can go to management to get a clearer view of what an item is representing. This information doesn 't take the place of anything the auditor has gathered but is suppose to help the auditor find the proper evidence that is needed for the audit. (AICPA, 2013) This information is important because if management does not supply that information or the information is being changed it could show that there are some wrong doings going on within the company. Management should not be withholding any information, especially if it is information the auditors is specifically requesting in order to properly evaluate the company. The last area that needs to be discussed to complete my top five auditing issues is the failure to express and appropriate audit opinion. (Hoffelder, 2013) There are three different types of audit opinions, unqualified, qualified, or adverse. The reason there are three is because there each represent a different level the auditor feels was accomplished by doing the audit. A unqualified opinions means that the company is in good shape and that there were no serious issues and that all the information is accurate. A qualified opinion means that there could be some issues but does not necessarily mean that the company is doing something wrong it just means the auditor was not able to get all the proper information that was need to properly perform the audit. The adverse opinion means that the company has serious problems. This could be something like the auditor finding fraud within the companies records. (For Dummies, 2013) The reason this is so important is because it shows how the company is doing if the information is not disclosed then the proper information isn 't getting out and that reflects on the auditors. This information is important to the shareholders and anyone who may be interested in the company.
References:
Accounting Concern. (2013). Professional Skepticism. Retrieved from Accounting Concern: http://www.accountingconcern.com/accounting-dictionary/professional-skepticism/
AICPA. (2013). AU Section 333; Management Representations. Retrieved from AICPA: http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00333.pdf
AUASB. (2012, August ). Professional Scepticism in an Audit of Financial Report. Retrieved from AUASB Bulletin: http://www.auasb.gov.au/admin/file/content102/c3/Aug12_AUASB_Bulletin_Professional_Scepticism_in_an_Audit_of_a_Financial_Report.pdf
Beasley, M. S., Carcello, J. V., & Hermanson, D. R. (2001, April). Top 10 Audit Deficiencies. Retrieved from Journal of Accountancy: http://www.journalofaccountancy.com/Issues/2001/Apr/Top10AuditDeficiencies
For Dummies. (2013). What 's in an Auditor’s Report: Opinions, Good and Bad. Retrieved from Dummies.com: http://www.dummies.com/how-to/content/whats-in-an-auditors-report-opinions-good-and-bad.html
Hoffelder, K. (2013, May 10). Top Audit Deficiency: Evidence Collection. Retrieved from CFO: http://www3.cfo.com/article/2013/5/auditing_audit-sec-sarbanes-oxley-caq-
ISACA. (2013). Due Professional Care. Retrieved from ISACA: ISACA