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Different aspects of auditing - Essay Example

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Different aspects of auditing

In addition, in question 4 the responsibility in relation to external and internal audit toward the society has been discussed.
Loebbecke A. (2000) stated that auditing has historically been concerned with the faithful and accurate accounting of economic resources. This concern arises from the imperative of maintaining accountability in the presence of agency conflicts between the management and owners of a firm. Over time, this notion of accountability has expanded as interest groups established new standards of performance. The underlying philosophy has, however been remained constant: essentially one of ensuring that accounting records have been kept and verifying compliance with generally accepted accounting principles.1
Hayes, R., Dassen R. , et al, (2005) addressed that the independence is one of the most pivotal traits of being an auditor. Hussy, R., (1999) has elucidated independence as the fundamental principle that the auditor must be, seen to be, independent to enable them to behave with integrity and make objective professional and business judgment. Independence could be of two forms as-
According to Hayes, R., Dassen R., et al (2005), independence is potentially affected by self-interest, self-interview, advocacy, familiarity and intimidation threats. To approach of this comment, the threats have been clarified as followed:
'Self-interest
'Self-interest Threat' occurs when a firm or a member of the assurance team could benefit from a financial interest in, or other self-interest conflict with, an assurance client. Examples of circumstances that may create this threat include:

Teoh, H. Y. & Lim, C. C. (1996) mentioned that self-interest threat occurs when, (1) any product or judgment of a previous assurance engagement or non-assurance engagement needs to be re-evaluated in reaching conclusions on the assurance engagement, or (2) when a member of the assurance team was previously a director or officer of the client, or was an employee in a position to exert direct and significant direct and significant influence over the subject matter of the assurance engagement2

Mintz S. M. (1997) pointed out that 'Advocacy Threat' occurs when a firm or member of the assurance team promotes or may be perceived to promote, an assurance client's position or opinion to the point that objectivity may or may be perceived to be compromised. Such may be the case if a firm or member of the assurance team were to subordinate to their that of the client.

Hussey R. (1999) addressed that 'Familiarity Threat' occurs when by virtue of a close relationship with an assurance client, its directors, officers or employees, a firm or a member of the assurance team becomes too sympathetic to the client's interests.

'Intimidation Threat' occurs when a member of the assurance team is deterred from acting objectively and exercising professional skepticism by threats, actual or perceived, from the directors, officers or employees of an assurance client. When threats are identified, other than those that are clearly insignificant, appropriate safeguards should be identified and ...Show more

Summary

An attempt has been made in this paper to comprehend different aspects of auditing specially emphasize on threats of independence, auditors liability, ethical dilemma and relationship between internal and external auditor with social responsibility. Question 1,3,4 and 2b have been attempted…
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