Why Do An Audit Free Of Interference From Management? Essay

PCAOB describes professional skepticism as a general duty of care that needs to be applied by the auditor throughout the duration of the audit engagement. Professional skepticism involves the auditor having a clear and questioning mind regarding the assertions that are presented by management or other client personnel. The auditor is instructed to not take the words or data presented by management as sufficient and appropriate audit evidence but rather the auditor needs to thoroughly audit the evidence with a questioning mind to achieve reasonable assurance about the persuasiveness of the evidence. Skepticism is composed of three elements; auditor attributes, mindset and actions. The PCAOB

1- Independence: - The internal auditor should have the independence in terms of organizational status and personal objectivity which permits the proper performance of his duties.

ABSTRACT: The purpose of this teaching case is to expand students’ understanding of the concepts of professional skepticism and independence. The case is based on an actual incident and illustrates the exercise of professional skepticism by a staff auditor who finds himself in the uncomfortable situation of accusing a friend of fraud. The case demonstrates the difficult personal and professional choices that auditors must sometimes make. In analyzing the case, students consider auditor independence rules, as well as the concepts of

Summary: The objective of this article is to clarify the significance of professional skepticism as an essential part of the auditor’s mindset, and to consider the reasons why approaching an audit with an attitude of professional skepticism is becoming increasingly important. The following are three case studies that will concentrate your consideration on what it takes to be a skeptical auditor when performing journal entry testing.

The Model of Trust Enhancement was established to enhance and maintain the public’s trust in the accounting profession. Over the last two decades, the ethics of the accounting profession has been questioned and public trust destabilized, in particular for auditors, due to the Enron debacle. The fact that an auditing firm would assist their clients with publishing an inadequate set of financial statements shows their willingness to violate laws and regulations (Sims & Brinkmann, 2003). According to the textbook, “Because trust is essential, even the appearance of an accountant’s honesty and integrity is important. The auditor, therefore, must not only be trustworthy, but he or she must also appear trustworthy” (Duska, Duska & Ragatz, 2011, p. 116). The majority of statements filed inadequately have a substantial impact on the credibility of the accounting profession as a whole. Sullivan (n.d.10) states that a CPA must possess a high level of trust, by applying professional judgment and enhancing the three trustworthy characteristics (ability, benevolence, and integrity) when resolving accounting ethics dilemmas (slide 3).

Professional ethics are guidelines set by professional organizations that guide its members in performing the functions of their job appropriately, while behaving in a professional and ethical manner (Web Finance Inc., 2016). Some of the characteristics of professional ethics include “knowledge, honesty, accountability, integrity, loyalty, compliance with the law and more” (Reference An IAC Publishing Labs Company, 2016, para. 3). Professional ethics are important because it builds credibility and shows that the person is capable of doing their job appropriately, regardless of the situation,

12-9: According to AU 240, auditors should exercise professional skepticism during the audit and discuss the risks of material misstatement due to fraud (Wells, 2013, p. 330). The auditor should also discuss the implications of the audit with the appropriate level of management. Finally, the auditor should obtain sufficient evidence to determine if material fraud exists and what the impact on the actual financial statements is (Wells, 2013, pp.

An auditor’s role in an audit is very important. An auditor must be able to collect enough evidence to supports their finding, and also be on the lookout for fraud. Company’s may or may not know the law, but it is the job to know the law, and be able to educate and report findings properly. Since the Sarbanes-Oxley Act, there have been provisions that have directly affected auditors. This paper will include the details of the Sarbanes-Oxley Act, how ethics and independence have affected auditors, as well implementation of new standards based on the Sarbanes-Oxley Act.

If the auditors of today followed the same rules they did in Great Britain during the 19th century, then America would be in trouble. With such a competitive and strong capitalistic market, it would be hard to not be tempted to alter the financial statements of publically traded companies if there were no independence standards. Today’s business world obviously holds independence of auditors to be important or else Michael Goodbread would have never been investigated by the SEC.

* Go to the AICPA Website to read the current AICPA code of professional conduct, located athttp://www.aicpa.org/Research/Standards/CodeofConduct/Pages/default.aspx. Next, assess the effectiveness of the current Institute of Management Accountants (IMA) code of professional conduct in promoting ethical behavior and providing guidance for the dilemmas managerial accountants

There are numerous threats to the independence of auditors which have been identified in the multiple studies and discussions both in Australia (such as the Ramsay report, CLERP 9 Paper) and internationally by IFAC, the European Commission

13. The ethical concept of independence means that an accountant employed: 
a. By a corporation cannot prepare financial statements for use by the company 's bank.
b. By one company cannot work part-time for another company.
C. By an auditing firm cannot own any stock in the company being audited.
d. By one company cannot accept a job with another company in the same industry.

When working in an organization, it is usually important to establish professional ethics while following consistent ethical principles. Professional ethics are personal and corporate standards of behavior that are set by businesses, associations, and organization. It creates an institution that reflects our own values and make us feel more confident about what is an acceptable behavior and what is not. This type of ethic could vary depending on the various types of situations, professions, and personal values. Many professionals that are trusted by the public like doctors, accountants, engineers and even an information technologist all have a Code of Ethics, which sets out expectations of the member’s behavior and how they operate internally and externally.

Code of ethics promotes the ethical culture in an internal audit profession. Principles and rules of conduct

Professional skepticism practices as neutral but discipline approach to detection and investigation. Per SAS No. 1 it suggests that an auditor neither assumers that management is dishonest or assumes unquestionable honesty. Professional skepticism requires fraud examiners to “pull on thread” in which means Red flags are warning signal or something that demands attention or provokes an irate reaction. Red Flag symptoms of fraud may be divided into at least six categories: unexplained accounting anomalies, exploited internal control weaknesses, identified analytical anomalies where non