Accounting, Organizations and Society 38 (2013) 596–620 Contents lists available at ScienceDirect Accounting, Organizations and Society journal homepage: www.elsevier.com/locate/aos An accountability framework for financial statement auditors and related research questions Mark E. Peecher a,⇑, Ira Solomon b,1, Ken T. Trotman c,2 a Department of Accountancy, College of Business, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, Champaign, IL 61820, United States
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con of doing this is that Brent is working off the clock and giving his time away to the company without compensation. This brings up an ethical problem for both Brent and the company. Brent has a duty to the company to perform services; in return the company has a duty to compensate Brent for the duties performed. Brent’s last option is to cut corners on the work and finish on budget. The pro to this is that Brent comes in on or under budget which has a chance to reflect positively on Brent. Conversely
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procedures for compliance audits, policies for control purposes. Basically it provides an oversight of public accounting firms that do auditing. 2. Auditor Independence: It provides standards for external auditor independence, so that conflicts of interest can be minimized. It also mentions the requirements for appointing new auditor and auditor reporting requirements. Auditing companies are prohibited from providing non-audit services (consulting) for the clients for whom they provide auditing
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to Mark after investigation 2. Ethical Issue Giles and Regas relationship lead to conflict of interest and damaging the reputation of the firm. 3.Stakeholders and Obligation CAA Management and Mark Sax. They are the stakeholders expect auditors to carryout their service with due professional care within a constrained time period. Giles and Regas here spends their personal time during workday. They also have the potential to cover up for each other if one or both of them screw up on audit
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presentation - Obligation to report findings truthfully and accurately. Independence – Impartiality and objectivity. Conclusions should based on evidence & findings Evidence- reports should have verifiable ability. Roles and responsibilities of auditors Inquiring of management and others to gain an understanding of the organization itself, its operations, financial reporting, and known fraud or error ✎ Evaluating and understanding the internal control system ✎ Performing analytical procedures
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of business records. Opinions given by the auditor gives an added credibility to the financial statements (Maqableh, 2014). Commonly, investors often rely on financial statements provided by auditor in making investment judgement and increase the productivity of financial markets. Financial statements provided by the auditors are often reviewed as credible, unbiased opinion that truly reflects the company financial positions. There’s no doubt that auditor independence is the core of auditing profession
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If there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time not to exceed one year, the auditor should review management’s plan to remedy the problems. If the substantial doubt goes unresolved, the auditor should add an explanatory paragraph to the audit report. In the event that an auditor receives a request to reissue his or her evaluation of going concern and remove the explanatory paragraph, one can refer to the PCAOB’s AU Section
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has: * “A position of trust, has a competing professional or personal interest” * “Competing interest can make it difficult to fulfil his or her duties impartially” * “A conflict of interest exists even if no unethical or improper act results.” * A conflict of interest could impair an individual’s ability to perform his or her duties and responsibility objectively. The Contract Manager has the following conflicts: * Fails to disclose conflict of interest in tender invitation list
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Investigating Fraud Risk In the backlash of fraud and failed auditing, a more stringent standard for auditors was enacted in hopes to avoid the failures of the early 2000s. The Sarbanes-Oxley Act and statements of auditing standards such as SAS 99 were put into place to accomplish this goal. Yet, with more stringent standards comes a heightened public expectation that may increase the potential litigation auditors face. In the world of auditing, a very important aspect that should always concern an auditing
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Phar-Mor Case 4.6 Questions 1. a) By hiring a member of its external audit team a company could gain insight into the auditor’s process and better devise methods of hiding fraud. b) Hiring a former auditor would greatly compromise and possibly impair the existing external auditor’s ability to remain independent. On top of having knowledge about the auditor’s practice, preexisting relationships could cause bias in the audit outcome. c) Sarbanes-Oxley Act 2002 limits the ability of corporations
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