Discuss the opportunities and challenges for the auditing profession under the Australian auditing model. You also need to address the recent regulatory attempts to improve the audit quality in Australia.
I will discuss the opportunities and the challenges of the auditing profession, the recent regulatory attempts to improve quality of audits and proofs of the organizational efforts. I will address the effects of applying artificial intelligence in the auditing profession. I will also examine how the auditors’ reliance on companies for income affects their independence in preparing audit reports. Finally, I will explore all the issues raised by regulatory attempts and come up with my final judgment.
Auditing is crucial for any business organizations, companies, government, and other not-for-profit organizations. Auditors do their audit recording by using an organization’s financial statements. The auditors must ethically present themselves. The auditing model of Australia has set rules, policies, and guidelines which should guide the auditors and control their actions to ensure that they conduct themselves ethically. We are doing a study on the auditing profession In Australia. We will explain all the chances, opportunities, and challenges that are faced by the auditing professionals who are under the Australian auditing model (Lenz and Sarens 2012). We will discuss how machine learning can affect the auditing profession and how the auditors’ dependence on companies for fee affects their independence. We will also consider the recent regulatory attempts by the Australian auditing model to improve the quality of the audits. We will use suitable case studies to support the discussion. Finally, we will clarify the concerns raised by the case studies and use them to draw the conclusion and judgment.
The Australian model for audition and the generally agreed standards guides auditors in their auditing duties. Some of these standards include; the prescribed duties of auditors when they are auditing financial reports, policies governing the availability and disclosure of all the companies’ financial statements, and the policies governing their roles and responsibilities. The auditing profession has many opportunities and challenges described in Australia’s model for auditing. The model has been trying to find ways to mitigate the risks and challenges of the auditing profession, as well as boost the opportunities within the auditing profession. There are opportunities within the auditing profession. Audit records keeping is a legal requirement for all organizations. The lending institutions also require proper books of records before they can lend money to organizations (Markets et al. 2010). As a result, the demand for the auditors is quite high, and with the increasing growth of industries and businesses, their demand has also grown, so the professional auditors do not tarmac for long before they can get employment. The types of businesses, organizations, industries are very diverse, and thus the auditors’ skills also grow considerably due to their wide range of experiences. This new experience has also boosted the auditors’ professional judgments, and as a result, they can make more informed decisions (Maijoor and Vanstraelen 2012). Some challenges these professional auditors are facing are; they face strict legal judgments if they make serious mistakes in their accounting, they are required to work under strict authorization before any organization can trust them and that their work is tiresome and they can easily make mistakes. Another challenge that the auditors could face could result from the advancing technology. As the technology is advancing, ways of record keeping are also changing, and so they have to keep learning and to find the advanced ways of auditing (Nuijten Twist and Steen 2015. The law of Australia treats auditing mistakes as frauds or as professional negligence which is punishable by the law. This could be a challenge if the auditing mistakes resulted from the company’s failure to disclose the correct statements of accounts.
During the past years, the condition of Australia’s inspections is worsening and worse still, all the steps that the Australian auditing model has employed are not bearing fruits. The organization has to implement new strategies to improve the quality of Australia’s audits and make the old plans work more effectively. The quality of reviews is the concerns that determine the auditors’ responses to the weaknesses in audit reports (Hossain 2010). The model discovered that the audit quality was crucial because it would help determine the quality of the financial report which is reliable. The Australia auditing model finally concluded that improving the quality of audits would be very significant in boosting the companies’ confidence in the worth of their financial reports. The model worked with its professional auditors to ensure that the audit reports agreed with companies’ performances. The model trained their auditors to be professionally skeptic (Soh Leung and Leong 2015). This meant that the auditors should investigate the authenticity of financial statements before auditing them. Professional skepticism also meant that the auditors should not accept the managers’ audits without investigating whether they are genuine or not (Arens Best Shailer and Fiedler 2009). The auditing model of Australia advised the auditors to do vivid research of the financial statements and data they organizational managers provide them with to ensure its integrity to enhance the quality of their audits.
The model has also advised their auditors to employ the use of artificial intelligence in their work. The artificial intelligence and machine learning would help the auditors reduce the chances of making mistakes in their calculations. The Australian model of auditing employed the artificial intelligence in storing the data and making it auto-generate the results and hence there could be rare cases of frauds. From the research, it was clear that machine learning made it easier for the auditors to analyze, interpret, and prepare audit reports because some processing and complex accounting algorithm were done by the computers (Issa Sun and Vasarhelyi 2016). Machine learning also reduces the chances of error and forgery in auditing because most of these transactions are free from human intervention. Machine learning and artificial intelligence have made it possible for the use the past data and audits to predict some risks and opportunities in the future. Machine learning has also made it possible for the auditors to detect frauds and hence avoid some error in the future and this has dramatically improved the quality of audit reports. Machine learning will enhance the work of the auditor, make it more accurate, and more presentable.
Auditors rely on the companies they are preparing audit reports for income (Kogan Sudit and Vasarhelyi 2018). This dependency may deny the auditors the chance of producing the audit reports independently and sometimes; they may be forced to auditing with the aim of pleasing the companies even if they are auditing in the wrong ways (Tepalagul and Lin 2015). This denial of the auditors’ independence has led to misleading audit reports of the companies (Turner Bienstock and Reed 2010). Recent research has shown that most companies have obliged the auditing firms to produce wrong audit reports to hide their actual financial positions and evade high taxation (Abbort Daugherty Parker and Peters 2016).
A recent study has shown the regulatory attempts by the Australian auditing model to improve the quality of their audits. A case study was carried out by the (PCAOB) Public Company Accounting Oversight Board (PCAOB). The company is a private not-for-profit organization that was established with the aim of checking companies’ auditing records. The main goals of the case study were to investigate the company’s attempts and strategies for improving the quality of their auditors. The PCAOB has created a program to enhance production of high-quality audits over the past decade (Petherbridge and Messier 2016). The institution has the duties of serving their investors by setting standards for auditing, examining the audits and the control systems of companies critically, and penalizing auditors who fail to adhere to the set standards. The PCAOB uses their programs to ensure that the auditors focus on their roles of safeguarding the company’s investors (Sjoberg and Johansson 2016). In the event where a company hires an auditor who provides misleading audit records, the company’s reputation may be at risk, and this could also affect other related industries. The PCAOB oversees the auditors’ auditing results and creates a program to mitigate risks that could result from the mistakes of the auditors. PCAOB has alerted the auditing practices in areas that are vital to controls, recognition of revenue, and the assumptions for concerns. PCAOB implemented a new policy on auditing transactions (Goos Dole and Geiger). The policies required that the auditors adopted the artificial intelligence With the aim of improving the quality of their audit records, PCAOB sought the public’s view on the challenges of auditing and the potential innovation and improvements to the model of auditor’s reporting. The company has also hosted meetings with their advisory groups to discern cases of frauds in auditing and identify the indicators of a quality audit. The company has set new policies to prevent incidents of frauds in verification and to mitigate the marketing risks. Some of the steps to avoid fraud activities include severe legal action, like reporting the person involved in these criminal activities to the authorities (Brunnetto Farr-Wharton and Shacklock 2011). Other measures may consist of penalizing the auditor by paying him/her less amount than the agreed amount or firing them. The auditors were required to show their professional skepticism by checking and analyzing whether the financial statements presented to them for the sake of auditing were authentic and uncorrupted.
The International Forum of Independent Audit Regulators (IFIAR) researched to investigate the quality of the audits prepared by many companies across the globe. The IFIAR examined the value of the audit reports that most companies made (Pannese and DelFavero 2010). The survey’s findings showed that most companies lacked enough audit procedures to ensure the quality of their statements. The study described that the segments that had the most inadequate audit procedures were among the most significant to the value of the audit reports. The audits of the companies had insufficient internal control systems and unclear data records. Reviews that were very fundamental to the financial companies and lending institutions had impaired loan losses, and their overall performance had deficiencies. The research showed that in spite of the companies’ continued efforts to fix the issue of low-quality audits, their efforts were still fruitless. The IFIAR advised the affected companies to take some regulatory steps to improve the quality of their audits. They urged these companies to keep a good record of their financial statements, employ auditors who were trustworthy, has enough professional skills and professional skepticism, and ensure clear data analysis, recording, and storage.
In 2014, the Accounting and the Corporate Regulatory Authority (ACRA) in Singapore carried out a program to monitor the accounting practices of companies globally. The ACRA’s reports showed that most companies had tried to make significant enhancements in their auditing controls, but on the other hand, there were still inconsistency data records (Whittington and Pany 2010). The incorrect data presentations showed the impairment of the audit results. There were changes, but they were very minimal, and most companies did not take the correct initiative towards the enhancement of the quality of their audits.
The SEC (Securities and Exchange Commission) in Thailand did a detailed survey on the financial performance of some companies and their initial steps towards enhancing the quality of their data. The SEC’s reports disclosed that most companies were striving to improve the quality, but the efforts were fruitless for most companies (Whitehouse 2011).
The ASIC (Australian Securities and Investment Commission) researched the ability of most Australian companies to enhance their audits. The ASIC’s findings described that most industries had made considerable exertions to promote the quality and value of their audits. The ASICS explained that these efforts needed some time before their fruits could be realized. The results from ASIC’s study showed that the companies steps would start to take effect after some time.
The excerpts above raised questions that would be crucial for the improvement of the audit reports. Some of the main issues that were raised were; what were the causes of the poor quality audits? Why did some initial steps taken by some companies not bear fruits? What could be done to improve the current situations of the companies if their exertions did not improve the condition? How could artificial intelligence affect the auditing profession?
The causes of the poor quality audits were fundamental in realization off proper quality audits. Some reasons were common to most research firms, but others were not. Poor leadership was noted by the AOB, ACRA, and SEC organizations. The auditors’ lack of professional skepticism was a common problem. ACRA found out that the many causes of the poor quality audits resulted from poor human and resource management, but ACRA and Singapore showed relatively high-quality audits (Cohen and Sayag 2010). The AOB in Malaysia also described that the low-quality audits were due to the poor labor and little comprehension of the audits of the clients’ businesses. ASIC clarified that the auditors needed to enhance the level of their professional skepticism, make audit records more appropriate and sufficient, and ensure that their work was reliable.
Understanding the causes of the weak audit reports helped the auditing firms come up with better solutions and suggestions on how they could mitigate the causes. The auditor’s committee and the directives suggested on ways to come up with high-quality reports. ACRA realized that they could improve the quality of their work by supporting the audit committee members and assist them to come up with better quality audits. The AOB took the initiative of enhancing the human resource management and helping them understood every single step of distinguishing quality audits. The ASIC tried to improve the quality of their audits by setting the ethical standards which all the auditors should adhere. It is not easy to improve the quality of audits, and the realization of the above solutions may take time. However, with a clear understanding of the root problems that could have resulted in the inadequate quality audits, it is easier to evade some mistakes, and the situation is a bit manageable. The PCAOB also resolved to come up with standards that would ensure that the audits were of a higher quality. The company will guarantee a right track of data records and events. The organization has settled into providing that all the financial statements and documents and kept with the utmost integrity, and they are readily available for auditing.
Conclusion
The future of auditing profession is bright despite the few shortcomings that the people already on the job are facing. Businesses organizations are expanding, and hence the current and the new challenges need to be dealt with appropriately. Proper auditing record has helped most organizations and institutions solve most crises that may have resulted from poor record keeping. Artificial intelligence has dramatically enhanced the auditing profession, and all auditors should implement it to ensure that their audit reports are of the best quality.
References
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