Auditor Ethical Standards and Auditing Strategies

Auditor honorable Standards and Auditing StrategiesDiscuss the ethical standards call for of take stockors.The Auditing Practices Board (APB) has issued new standards governing the ethical conduct of scrutinizeors which commenced on 15 December, 2004 (Cosserat, 2004). The following lists the new Ethical StandardsIntegrity, Objectivity and independenceThese new ethical standards also include the feature that clients must also facilitate policies new standards is that auditors of a control environment select an ethics henchman. This position entails the review of the blottos procedures and policies which regard to compliance and as such(prenominal) it provides the associated centering for partners. The new Standards recognize that for smaller audit firms it might not be practical for an ethics partner to be designated.The new Ethical Standards argon a import of a number of international developments equal by either international organizations and or countries that get helped to bring about the changes to Standards. These are represented by the followingThe United States jurisprudence termed the Sarbanes-Oxley Act which lays down the independence requirements for auditors. In especial(a) it addresses audit firms that audit SEC registrants or participant in signifi dropt parts of the foregoing.A report that is titled make Public Confidence in Financial Reporting, which is an international perspective that was developed as a result of the commissioning by the IFAC of an independent group to address the previous, andAs a result of the produce of the Principles of Auditor Independence which was put forth by the International Organization of Securities Commissions.The new Standards are what are termed principles- found as opposed to rules-based. The preceding means that there are clear requirements as well as prohibitions. The key underpinning of this change provides for stricter compliance with the spirit of intention and consequently prevent the possi bility of either a firm or person attempting to evade or avoid conformity with the rule. The effect of the foregoing helps to visit compliance with ethical standards in that intention covers a broader ethical parameter. In effect, one could avoid or evade breaking a rule, however the intent with either actions or the change in former action(s) could point to the definitive attempt to do so. This broader interpretation widens the scope of ethics and requires auditors to conduct their actions whence throughout the process.In a speech delivered by Douglas Carmichael at the AICPA National Conference on 12 December, 2003 (Carmichael, 2003) he sets forth the examples of alleged audit failures of National Student Marketing in 1969, Penn Central in 1970 and Equity Funding in 1973 as instances whereby principle based auditing might feel got forestalled the problems. The foregoing is confessedly of Enrons collapse in 2001 and indicates that the broader scope or ethics afforded auditors under the principle based methodological analysis provides better rules and guidance from which auditors brush aside act.Financial, traffic, employment and personal relationshipsThis segment of the new Standards communicate the varied relationships that can and do exist between clients and audit firms and their staff. This limits the nature of relationships and threats to the objectivity and independence of audits and prohibits those which the APB believes that no effective safeguards can be introduced.Long association with the audit engagementAssociations of long duration poses potential threats, in particular with regard to those represented by publicly listed companies. Thus, the new Standards set forth the rotation of audit firm partners to introduce objectivity as well as independence. The new Standards sets that term as five (5) days as the continuous consequence limit as well as a break period of five (5) years for the rotation.Fees, economic dependence, remuneration and evaluation policies, litigation, gifts and hospitality.One earthshaking, and highly debated point is the requirement that no single client shall account for more than ten percent (10%) of an audit companys yearbook fee. This figure is fifteen percent (15%) for non-publicly listed firms.Non-audit serve provided to audit clientsThis segment of the new Standards identifies the general approach to non-audit serve and applies general principles to various specific non-audit aspects such asInternal audit servicesAccounting servicesInformation technology servicesValuation servicesRecruitment and remuneration servicesCorporate services, and impose servicesExplain what is meant by the term Risk Based Auditingand the advantages that accrue to the auditor inutilizing a run a danger basedRisk based auditing entails the providing of independent assurances on the management of risks, and forming an opinion which sound controls have been implemented maintained to mitigate those signifi cant risks . Management has agreed upon (Association of Chartered Accountants, 2002). Risk based auditing addressed some important aspects and questions which controls-based auditing does not answer. The benefit of risk based auditing is that it provides a basis for the auditor to have an examination of the business process and its risks. The foregoing provides a context for the results.Risk based auditing changes the carriage in which informal auditors think as well as converse regarding control and risk. The auditor anticipates change and examines the manner in which management deals or is dealing with risks (McNamee et al, 1999) An advantage of risk based auditing is that the auditor is typically feel at control activities that were designed at some previous point to deal with aspects which may have long since been forgotten. In other words the internal auditor might be examining activities which might or might not be relevant in terms of current risks. Said controls could act ually be extraneous as a result of monitoring deviceing aspects which are either no longer important or in existence. Another aspect is that essential controls could very possibly be overlooked as in a sense they do not exist yet due to changes in the business process.A good number of internal auditors have implemented the utilization of control self-assessment (CSA) as a means to address some of the concerns of management in capturing the state of the business process with regard to risk and control. It is important to note that control models both limit and define CSA so as a result these applications usually start with controls to the right and to the left of the internal audit. The limit of CSA is in its ability to explore the future.Risked based auditing has internal auditors anticipating change. As opposed to the old approach of focusing upon history, the reports generated by auditors address the present as well as the companys preparedness level with respect to dealing with the future. The advantage is that internal audits complete the circle with respect to assurance of control regarding present operation plans and provide input to risk assessment with regard to the strategic plan. As a result, management places a higher degree of determine on risk based internal audits than those of the traditional controls based type. The failure of the United States based Enron during 2001 has been a major factor adding to the impetus for improved fiscal reporting and auditing /Crossert, 200). The essential elements of todays financial reporting systems are business viability along with profitability assessments (Bell et al, 1997). The foregoing is accomplished by key audit steps, auditing procedures concerning strategy analysis, key indicators that are required as well as necessary to effectively monitor performance and risk assessment.Enrons collapse has brought about standards that strengthen the responsibility of auditors in detecting prank. The preceding req uires evaluation of the effectiveness of an entities first management in preventing such misstatements as a result of fraud or other means. It also calls more attention to irregularities of a minor nature and thus hold dear their significance as the multiplicity of such small irregularities can be significant.Describe three (separate) codes of legislation under which statutory auditors may be required to make a report to the governor in the event of non-compliance on the part ofa client with the law and provide examples where an auditor would be required to issue a reportThe Criminal Justice Act (Irish regulation Book, 20053) under Section 59 Reporting of Offences sets forth legislation whereby auditors may be required to issue a report to the regulator as a result of non-compliance by a client with statutes of the law. It describes under relevant person (Irish Statute Book, 20053) (a) who audits the accounts of a firm Under the Act, an auditor is required to issue a report for th e following(2) Where the accounts of a firm, or as the case may be any information or document mentioned in subsection (1)(b), indicate that an offence under this Act (other than sections 8, 12 to 15, 49(1) and 52(8) may have been committed by the firm concerned, orsuch an offense may have been committed in relation to its personal business by a partner in the firm or, in the case of a corporate or unincorporated body, by a director, manager, secretary or other employee thereof, or by the self-employed man-to-man concerned,the relevant person (which in this instance includes the auditor as depict above), shall, notwithstanding any master obligations of privilege or secretity, report that fact to a member of the Garda Siochana.The instances referred to by the preceding are described as (2) For the purposes of this Act a person deceives if he or she are as follows (Irish Statute Book, 20053) 1. (a) creates or reinforces a false impression, including a false impression as to law, take to be or intention or other state of mind,(b) prevents another person from acquiring information which would affect that persons judging of a transaction, or(c) fails to correct a false impressions which the deceiver previously created or reinforced or which the deceiver knows to be influencing another to whom he or she stands in a fiduciary or confidential relationship An example of the preceding shall be addressed under section (a). This refers to an instance whereby either contracts, or real property value of a corporations assets are miss-stated. Such can be accomplished through the utilization of a qualified or recognized third party or in secret approval whereby said third party conducting said valuation is unaware of the addition of material miss-statements that inflate the value or price under said instances. A contract, for example, could be altered as to the agreed upon terms, payment, and thus said inflated price affects the outcome of an audit whereby the firms value of income is thereby heightened.The corresponding type of back office procedure could also relate to an appraisal of real property such as plant, real estate or equipment whereby either its price, terms of sale or existence has been altered. These types of spoil are the sustentative underpinnings. The foregoing broad examples represent the activities which resulted in the United States affecting such companies as WorldCom and spheric Crossing. The miss-statement of various financial reporting areas caused the valuations of these companies to be inflated thus increasing the stock price forward subsequent investigations uncovered the miss-statement errors. The bankruptcy proceedings and drop in stock price affected millions of shareholders and caused significant financial loss.BibliographyAssociation of Chartered Accountants. 2002. Definition of Risk Based Auditing. http//www.accaglobal.com/technical/responses/archive/650602Bell, , T., Mars, F., Solomon, I. Thomas, H. 1997. Auditing Organizations Through a Strategic Systems Lens The KPMG Business Measurement Process. KPMG Peat Marwick LLP, Illinois,Carmichael, Douglas. 2003. Professionalism is Primary. Speech delivered before AICPA National Conference 12, December, 2003, Washington D.C.Cosserat, Graham. 2000. recent Auditing. John Wiley Sons. ISBN 0470863226Irish Statute Book. 2003. Criminal Justice (Theft and Fraud Offenses) Act. www.irishstatutebook.ieMcNamee, David, Selim, Georges. 1999. The next step in risk management risk-based auditing. Internal Auditor, published by The Institute of Internal Auditors, Altamonte Springs, Florida, The United States