StudentShare solutions
Triangle menu

Auditing failures and quantitative measurement of materiality judgement - Essay Example

Not dowloaded yet

Extract of sample
Auditing failures and quantitative measurement of materiality judgement

This may be resulting due to the intentional or unintentional involvement of the auditor in accepting serious misstatements from the company professionals. Large number of factors can be defined as the causes of the audit failure. However, broadly following four categories engulf almost all aspects of audit failure. First and foremost is the failure on the part of the auditor to ensure the compliance of reporting financial statement with the Generally Accepted Accounting Principles (GAAP) or standards of audit. An evidence in the survey reported that nearly 49% of the audit failure resulted due to inability of the auditor to fully comply with the GAAP and GAAS rules. For example, Ernst & Young in USA has recent been charged to pay around USD two million for violating PCAAOB rules of auditing in the audit of its client Medicis Pharmaceutical Corporation (Public Company Accounting Oversight Board, 2012). In the referred case, E&Y remained the external auditor of the company for nearly 20 years and financial statement of 2008 is found to have clear distortion from GAAP rules. The second reason that results in the failure of audit include the due involvement of the auditor. This results when auditor issues due report that warrants compliance of the financial statement with the set standards and principles. ...
d penalizes the auditor for the reason that failure ultimately results due to the lacking on the auditor’s part (Peursem, Zhou, Flood, and Buttimore, 2007). It is evident that auditors’ firms usually end up paying the penalty without agreeing or denying the charges (Peursem, Zhou, Flood, and Buttimore, 2007; United States Securities and Exchange Commission, 2013). The third aspect of the audit failure results when an auditor intentionally or intentionally ignores the investigation requiring component of the financial statement due to having some financial interest in the organization. In almost all cases of the audit fraud, the auditors are investigated for supporting fraud in lieu of having direct and indirect financial interest in the organization or negligence. According to the Peursem, Zhou, Flood, and Buttimore, (2007) with respect to the case of Adelphia, Deloitte had a financial interest in the company as it was largest and long terms standing in the clientele list of the Pittsburgh office of Deloitte. The case of GTGI also faced this issue when auditor relied heavily on the information provision by the management representatives. Auditor in this case ignored the need of giving exploratory assessment to the revenue and other related components of the financial statement. Finally, the most common aspect of effect is having some personal relationship with the client or entity for which the auditor is providing a service. Such relationships result in impacting the audit activity than having normal business relationship in independency. For instance, Peursem, Zhou, Flood, and Buttimore, (2007) have reported the case of Adelphia also claimed that many partners of the audit firm had a relationship with Adelphia and the family member of the management of the ...Show more

Summary

ANSWER #1 The world of business, investment and commerce is faced with the challenge of rising percentage of audit failures. Audit failures not only harms the interest of the investors of business but at the same time may result in endangering the profession…
Author : batzlula
Auditing failures and quantitative measurement of materiality judgement essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Auditing failures and quantitative measurement of materiality judgement"
with a personal 20% discount.
Grab the best paper

Related Essays

Materiality in Auditing
The audit process involves a study of a determination method of materiality,and of its significance in the audit process, and it offers a linkage between the audit risk and the materiality. The main aim of this research essay is to
8 pages (2000 words) Essay
Materiality in Auditing(Discuss these abstracts in the context of academic research and recent developments in audit regulation and practice)
The Statements on Auditing Standards (SAS) referred to it as the “concept that recognizes that some matters, either individually or in aggregate, are important for fair presentation of financial statements in conformity with generally
7 pages (1750 words) Essay
The title to be used when submitting this assignment is Materiality in Auditing
need for the auditor to concentrate efforts on the most important and relevant aspects of the client’s financial statements (Millichamp & Taylor, 2012). This major demand requires that the auditor must assess the audit risk and ensure that the opinion passed on the financial
8 pages (2000 words) Essay
Materiality in Auditing
lity is critical in auditing because it helps auditors to reduce the risk of overlooking misstatements in the financial records, which may mislead users such as investors and the management. The concept also helps auditors in planning their audit and carrying out their functions
8 pages (2000 words) Essay
Materiality in Auditing
The main purpose behind is that financial statements are the main drivers for investment decisions in a firm, and the accuracy of the information is vital to satisfy stakeholders of the process. If the interpretation of data reveals mistakes in financial statement will not only
8 pages (2000 words) Essay
Materiality in Auditing
The main purpose behind is that financial statements are the main drivers for investment decisions in a firm, and the accuracy of the information is vital to satisfy stakeholders of the process. If the interpretation of data reveals mistakes in financial statement will not only
8 pages (2000 words) Essay
Materiality in Auditing
To increase the importance of the financial information, the test should ascertain if what is contained in the resulting information is significant so as to be included in the financial statements (Kwok 2005, p.145).This essay
7 pages (1750 words) Essay
Materiality in Auditing
The financial statement differs from company-to-company on the basis of its performance. A decade after decade financial auditing has helped companies to sustain in the global business arena with proper ethical consideration. Due to economic turmoil, every company has become more conscious about financial statements and auditing.
6 pages (1500 words) Essay
Materiality in Auditing
This decision and responsibility is separate from what the entity itself makes during the preparation of financial statements. Materiality in auditing refers not simply to quantified amounts, but also to the impact that the amount portends in
8 pages (2000 words) Essay
Materiality in Auditing
The financial statement differs from company-to-company on the basis of its performance. Decade after decade financial auditing has helped companies to
1 pages (250 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation