Audit Quality in Australia - Assignment Example

Name: Institution: Topic: Audit Quality in Australia Professor: Course: Date: Audit Quality in Australia Audit quality in the point of view of an auditor is about the delivering of an appropriate, independent profession opinion on financial statements as evidence and objectives. Credibility and ethics play a pivotal role in the financial report and independent assessment process as highlighted by the global financial crisis (Abdullatif and Al-Khadash, 2010, p. 214). The nature of the global financial crisis and scope of the indefinite economic conditions have affected most entities in various sectors of the economy. This has resulted to further complications, risks and doubts for auditors. Treasury takes into consideration that the composition of it strategic review of audit quality provides an opportune to assess the meanings of the universal fiscal conflict on the quality of audit in Australia and on the performance of Australia’s review control system and function.3 Companies will be inspected all situated in Australia. The files in the individual companies will be viewed (Bushman and Piotroski, 2006, p. 102). Keywords: Audit quality Objectives/Aims 1. To develop high quality external audits of financial reports. 2. To maintain and elevate the standard of conduct in the auditing profession. 3. To investigate improvements required that should comply with the Australian standards. 4. To inform the auditors where necessary. 5. To assess the effectiveness of the companies efforts in determining eligibility and auditing practice. Methods 1. Audit Inspection Program It is in line with the methods and best practice standards that are adopted by inspection bodies in the key developed economies. This was done by the ASIC that is an independent oversight regulator with statutory powers and is essential to the Australian system. ASIC investigated recent failures of the companies and future public assessment reports (Eilifsen and Willekens, 2008, p. 84). 2. Professional Accounting Bodies Quality Reviews This was done by three professional accounting bodies. They enhance the audit inspection program that was conducted by ASIC. The principal appraisal companies were subjected only to an ASIC inspection, and a quality analysis was conducted by a professional accounting body. 3. Auditor Independence Function If there is any sequence to improve the work of the firms in relation to auditor independence so as to eliminate any duplicated effort. Audit Firm Arrangements and Processes I. The Culture within the Firm It was viewed that the companies considered their local culture relevant to the relation to the audit quality. This was viewed with the ASIC’s auditor inspection program, the observation, conclusions and reports that emphasized on professional judgment within the requirements of the standards of auditing (Cowperthwaite, 2009, p. 71). It was considered that, within the Australian audit act system there are strong incentives in ensuring that audit companies endeavor for a good performance according to audit standards. The Skills and Personal Qualities of Audit Partners and Staff It was found out that skills and qualities of audit partners and staff play a vital role in evaluation quality. It is viewed that auditing is essential depending on the individual auditors and employees. It was viewed that the conclusions of the auditing information relating to the development, use and benefit of production knowledge, consumer and trade devoted judgment, the individual attributes of auditors, support and maintenance of staff should be put into consideration. Factors outside the Control of Auditors a) Corporate Governance and the Audit Committee It was viewed that auditors play a decisive role in ensuring the truthfulness of a company’s financial transactions and methodology of auditing also the sovereignty and objectives of the external auditors. They also ensure that the agency has substantial personal financial control systems. It was viewed that the companies’ principles and recommendations relating to the framework, composition and responsibilities of the audit committee were followed according to the international practice standards DeFond, Wong and L Shuhua, 1999, p. 311). It was viewed that emancipation of an audit committee could not invalidate the ultimate responsibility of the board of directors in ensuring the integrity of the company’s financial reporting and means of auditing. b) Auditor liability Introduction of measurements to address auditor liability in terms of international best practice standards is considered as critical to reforms. c) Registered Company Auditor It was viewed that the views of stakeholders on two strategies that may help in addressing the reduction in the number of registered firms’ auditors. There would be attention to introduce basic financial reports and requirements. d) Auditor Liability Australia has introduces various measurements for addressing the issues of auditor liability in terms of international practice standards to be considered to be the front position of reforms in this area (DeAngelo, 2004, p. 112). There has been an idea to observe in consultation with key stakeholders including audit profession, auditor liability consequences of the high object of class actions in Australia and the role of litigation funders. e) The Regulatory Environment The UKFRC has included the regulatory framework relating to factors outside the auditors' parameter. The review rule system and the audit quality assessment method are both put into consideration as separate key drivers to evaluate quality. IOSCO issued a consultation paper survey of non professional ownership structure for analysis companies in September 2009. The main policy driver underlying the development of this article is IOSCO’s concern about the risks to the capital markets introduction by application in the market for a large public enterprise inspection service. On the other hand, application in the audit market raises particularly crucial policy issues that lie outside the primary range of the treasury’s review of audit quality (Askary, Pounder and Yazdifar, 2008, p. 69). On the other hand, the IOSCO consultation paper recognizes that any proposals to disband ownership restrictions might have an impact on the audit company capability, professionalism, independence and audit quality. It looks at the potential benefits of removing ownership restrictions and potential influence. Treasury proposed to monitor the progress of IOSCO’s work on the project. The importance of the internal audit management system as a driver of audit level is excellent by the fact that regulations respond to review quality issues are increasing. Observation 120 audit files aspects participation were reviewed in the companies over the period. In a smaller number of these files, a tarpaulin analysis was carried out putting into consideration all aspects of auditing procedure. The document sections were spread across various sectors with economic periods reporting ended between 30th June 2009 and 30th June 2010 11% were for 30th June 2009, and 58% 30th June 2010. The files were selected considering various factors including industries alleged to be at higher risks due to the global economic downturn, association of auditing that had significant reduction in audit fees and firms identified in other ASIC activities. The reviews of the files observed had sufficiently appropriate audit evidence that supported the conclusions reached and demonstrated the conduction of the audit was in agreement with the relevant Australian auditing standards (Audit Quality Forum, 2008, p. 5). In different files reviewed the related sufficient deficiencies and relevant evidence obtained form conclusions about the assertion audit for poor documents of the performed assessment procedure (Ball, 2006, p. 33). It was also observed that a small number of incomplete or late view of files. This led to a risk of inadequate performance of the audit report. The auditors explained that the auditing was done. It was also observed that there were some situations that the auditors relied on evidence that was inappropriate in providing guarantee required in the reduction of risk of substance incorrect account for selective assertions to an acceptable low level. Using the work of another auditor, for instance the principal auditor, it is necessary to consider the professional competence of the other auditor. Procedures should be carried out by the chief auditor so as to obtain appropriate evidence that the work of the other auditor is sufficient for the purpose of the principal auditor (Mills 2010, p. 55). The other auditor can be another auditor in the same system as the principal auditor or independent. In some of the reviewed files where other auditors were utilized it was observed instance although the chief auditor placed reliance on the work of another auditor, the files did not have satisfactory evidence that the chief auditor issued strict orders to the other auditor, assessed the appropriate competence and freedom of the other auditor, and consideration of the work performance by the other auditor. In some cases that the auditor advised they visited the operations of overseas subsidiaries, meetings with other auditors, reviews to other auditors this evidence was not palpable on the audit files observed. In most cases, the other auditor was part of the director’s auditor’s net. On the other hand, it is a prerequisite for the principal auditor to put into understanding the independence and effectiveness and evaluation of the other auditor. Conclusion The focus was the opinion of whether each group had documents and implemented a quality management system that provides reasonable assurance that the companies act in accordance with the auditor independence requirements in Div 3, 4 and 5 of the Corporations act and the company’s appraisal methods facilitate the performance of their audits complying with the Australian auditing standards. The purpose of the survey was not to make specific requirements on ways of improving independence or audit policies and systems. On the other hand during the analysis we show cased to each company areas for improvement. There were reflection of the following areas of the company’s quality management system, administration responsibilities for quality within the company, ethics, compliance and continuity of customer relationship and involvement, human resources, operation participation and monitoring. The report concentrated on reviewing each company’s independence systems and procedures. Limited tests were carried out as well as examination of the company’s assessment methods in fulfillment with Australian auditing standards operative financial reporting durations starting prior the date of the report. There was the study of the conduct aspects of a restricted number of archived independent audit involvements for concurrence with each company’s stated inspection procedure and relevant Australian auditing standards as the date of each review. It should be noted that the Articles of Association of CPA Australia support for establishing an investigating Committee and a disciplinary committee. Complaints against members refer to the investigation committee that interviews the members, and get hold of information from any sources. It is observed that as part of the reforms and at par with the direction adopted by the international federation of accountant’s. Australian accounting bodies have adopted the international shift in refining the ethical codes. In July 2006, Australian accounting professional and ethical standard board released APES 110 Code of ethics for professional accountants that align with the IFAC code of Ethics for professional accountants and shows the basic principals and behavior expectations that the members of the profession must hold on. Ethical threats are identified, and applications are made to the auditors and accountants. The importance of the internal audit control framework as a quality of assessment quality has been exalted based on the fact that the regulatory reactions to evaluate quality matters are increasing on an international angel as a result of the globalization of capital markets. A recurring theme appeared in the research for review on audit quality. The globalization of capital markets has obligated policy and regulatory coordination and collaboration internationally, hence, being appropriate that the national regulatory framework, globalization of capital markets and audit quality. It is observed that these types of international regulatory coordination and cooperation are key elements in making sure Local Corporation of all sizes is contributing effectively to evaluate quality. The following were conducted while carrying out the report: review of the material provided by the companies under scrutiny pursuant to the ASIC Act, aspects of a selection of audit relationship, company’s network and methods for managing compliance with the audit independence requirements of the partnership Act, and ensuring audit quality. In addition, there was limited testing of the company’s compliance with its independence and audit quality policies systems and procedures as well as interviewing chosen human resources, leaders of the company’s, partners and employees It is pertinent to note that audit quality is paramount. It largely depends on the auditor as an individual, his or her skills, and the manner in which they carry out the work. If the auditing process is not efficiently carried out, it will affect the organization and clients. 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