Auditing refers to the process of inspecting the various financial and accounting documents of the business organizations in order to make it sure that all the financial documents are free from material misstatement, frauds and manipulation (Arens, Elder & Mark 2012). At the time of conducting the audit operation of the business organizations, it is the responsibility of the auditors to comply with all the required auditing standards and principles. Apart from this, it is the utmost priority of the audit professionals to maintain the aspects like objectivity, integrity, honesty and others in their various audit works. The auditors should not intentionally misinterpret any information of the organization. It is expected from the auditors that after conducting all the necessary audit operations, they will provide a true and fair audit opinion that will be free from any kind of biasness and the influence of the audit clients. At the time of conducting the audit operation of the organization, the auditors have to face some kind of major pressures like occupational pressure, job role pressure and others (William Jr, Glover & Prawitt 2016). Apart from this, the auditors have to face another kind of major pressure that is the pressure from the client’s end. There are instances in the audit operations where the audit clients pressurize the auditors of the organization to produce the audit opinion that will be in the favor the audit clients. These types of pressures come in two forms; they are Explicit Pressure and Implicit Pressure. There are differences between these two kinds of client pressures. These two types of pressures are discussed below:
Explicit Pressure: In case of the explicit pressure, the audit clients directly articulate the auditors or pressurize the auditors for their desired outcomes. In the audit operations of the business organizations, explicit pressures have negative impact on them. Explicit pressure has its negative impact on the audit judgment or the audit opinion. In case of the explicit pressure, one person is influenced by another person to get the desired audit results. Hence, it can be said that the auditor is accountable for this kind of audit judgment (Yuen et al., 2013). Later, this kind of accountability leads to the inappropriate audit judgment. In case of explicit pressure, there are possibilities that the auditor can be financially or non-financially beneficial from these kinds of agreements. In this case, this financial and noon-financial interest of the auditors leads to the Self-interest Threat of the auditors. There are various aspects of explicit pressure of the clients. In the process of explicit client pressure, in some of the cases, the auditors of the organizations have to choose the preferred accounting standards of the clients. Hence, the auditors have to leave the true and fair accounting procedures because of the pressure of the clients. Due to the presence of explicit pressure of the clients on the auditors, biasness is seen in the audit judgment. On a more precise note, the auditors manipulate the financial documents of the business organizations and due to this; the financial statements of the organizations do not reflect the true and fair financial position of the businesses. The investors of the organizations have to face many negative consequences for the effect of explicit pressure of the clients. As the financial statements of the business organization do not reflect the true financial position of the company, the investors may have to face massive losses regarding their investment. Hence, from the above discussion, it can be said that there are many negative impacts of explicit pressure on the auditors, clients, investors and organization (Koch & Salterio, 2017).
Implicit Pressure: The concept of implicit pressure of the audit clients is different from the explicit pressure of the audit clients. In case of the implicit pressure of the audit clients, the clients put pressure on the auditors for their desired results, but no directly. Hence, it can be said that, in case of implicit pressure of the audit clients, the audit clients indirectly pressurize the auditors to provide the audit judgment that favors the audit client. In this case, one can take the example of the employees of the business organizations. The employees of the business organization do not need to state the fact that they do not want to be the source of any kind of organizational deficiency. Implicit pressure can be considered as the natural pressure on the auditors. At the time of the engagement of the audit partners, the business organizations do not directly state that they want their desired audit judgment, but the audit engagement for any particular organization creates automatic pressure on the auditors. This is called the implicit pressure of the audit clients. One of the major reasons behind the implicit pressure is to engage with the activities of client management (Knechel, Niemi & Zerni 2013).
In the process of client management, the auditors have to provide different kinds of advises to the clients for the future expansion of the businesses. In the process of client management, the auditors of the business organizations automatically pressurize themselves in the process of client management. In the process of implicit pressure of the audit clients, the auditors of the organizations choose the desired accounting policies of the audit clients without any force of the audit clients or any external party. One aspect of implicit pressure of the audit clients is same as the explicit pressure of the audit clients and that is the level of negative impact on the audit judgment. Due to the presence of implicit pressure of the audit clients, the auditors of the organizations fail to deliver the true and fair audit report of the business organization. Apart from this, the potential investors cannot judge the true and fair financial position of the organization as the audit report is full of biasness and the true judgment is not provided. Hence, from the above analysis, it can be said that the effects of implicit pressure of the audit clients have also negative effect on the auditors, the company and the investors of the organizations.
References
Arens, A. A., Elder, R. J., & Mark, B. (2012). Auditing and assurance services: an integrated approach. Boston: Prentice Hall.
Knechel, W. R., Niemi, L., & Zerni, M. (2013). Empirical evidence on the implicit determinants of compensation in Big 4 audit partnerships. Journal of Accounting Research, 51(2), 349-387.
Koch, C., & Salterio, S. E. (2017). The Effects of Auditor Affinity for Client and Perceived Client Pressure on Auditor Proposed Adjustments. The Accounting Review.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic approach. McGraw-Hill Education.
Yuen, D. C., Law, P. K., Lu, C., & Qi Guan, J. (2013). Dysfunctional auditing behaviour: empirical evidence on auditors’ behaviour in Macau. International Journal of Accounting & Information Management, 21(3), 209-226.
As per the provided pictures, the accountants of the business organizations are compared with the T-Rex dinosaurs and the auditors of the organizations are compared with the Argentinosaurauses. It implies that the accountants are the fierce and defendable; and the auditors are wise as they can see everything. The inner meaning of this topic is about the accounting and auditing profession. There are many similarities along with the dissimilarities in accounting and auditing profession. Accounting and auditing can be considered as the two sides of the same coin. Accounting is the process of taking care of the daily financial and accounting activities of the business organizations like the recording of the earning of the organizations, recording of sales, purchases and many others (Bebbington, Unerman & O’Dwyer, 2014). On the other hand, auditors have to perform the same tasks as the accountants, but the auditors have different job responsibilities. It is the responsibility of the auditors to inspect the financial documents of the organization to make it sure that there is not any manipulation in the financial statements of the organizations and all the financial statements are prepared as pert the required guidelines and principles. Due to the difference in the job responsibilities of the accountants and the auditors, often-major conflicts can be seen between these two professionals. Due to the fact that the auditors inspect the works done by the accountants, internal conflicts can be seen between the auditors and the accountants. The accountants of the business organizations have the sole responsibility to prepare various financial statements of the organization. For this reason, the accountants are considered as aggressive dinosaurs. On the other hand, it is the responsibility of the auditors to inspect these financial statements made by the accountants of the organization. For this reason, the auditors need to have some specific set of accounting knowledge (DeFond & Zhang, 2014).
The auditors need to have specific knowledge about the organizations in order to solve various kinds of financial problems of the organization. After that, the auditors must have in depth knowledge about accounting and various financial aspects of the organization. In order to find various errors and manipulations in the financial statements of the organization, a thorough knowledge about the accounting procedures is needed (Henderson III, Davis & Lapke, 2013). The auditors must have the problem solving ability, as they have to solve various kinds of critical problems. The auditors need to be passionate about the accounting and financial problems. One of the major skills that an auditor must acquire is effective communication skill. The auditors need to be able to properly communicate with the people of the business organizations. Most importantly, an auditor needs to be innovative towards their job profession. With the help of the ability of innovation, the auditors are able to solve very critical level of financial and accounting problems (Pike, Curtis & Chui, 2013). Based on the above discussion, it can be said that the auditors of the business organization need to have some special set of skills in order to conduct the audit operations. With the help of these skill and qualities, the auditors of the business organizations have upper hand on the accountants of the organization. The accountants of the business organizations make many mistakes in the financial statements of the organization at the time of making the financial statements (Schmidt, 2014). These types of mistakes happen with intonation or without intention. It is the responsibility of the auditors to find all these mistakes of the accountants. Thus, from the above discussion, it can be said that the auditors have all the knowledge about the financial activities of the organization. For this reason, the auditors of the organizations are compared with the Argentinosaurauses.
References
Bebbington, J., Unerman, J., & O’Dwyer, B. (2014). Sustainability accounting and accountability. Routledge.
DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58(2), 275-326.
Henderson III, D. L., Davis, J. M., & Lapke, M. S. (2013). The Effect of Internal Auditors’ Information Technology Knowledge on Integrated Internal Audits. International Business Research, 6(4), 147.
Pike, B. J., Curtis, M. B., & Chui, L. (2013). How does an initial expectation bias influence auditors’ application and performance of analytical procedures?. The Accounting Review, 88(4), 1413-1431.
Schmidt, R. N. (2014). The Effects of Auditors’ Accessibility to “Tone at the Top” Knowledge on Audit Judgments. Behavioral Research in Accounting, 26(2), 73-96.
In the provided case, it can be seen that there are four pictures. In the above two pictures, some people are busy with a huge number of documents and person is ticking the boxes. In the below two pictures, two people are confused about the selection of answers that whether it will be yes or no or maybe. From all the four pictures, it can be understood that there is a connection between the above two pictures with the below two pictures. All the four pictures are about the documentation process of auditing. It is the responsibility of the auditors to make the process of documentation in the audit process effectively. The documentation process in auditing is an important aspect of the auditing profession (Backof, 2015). The process of documentation is a written report that includes all the audit conclusions of the auditors. This documentation process helps the auditors in every step in the audit process. The three major aspects of the process of audit documentation are audit planning, audit performance and audit supervision (Aikins, 2013). Among all these three aspects, the most important one is audit planning. At the time of conducting the audit operation of the business organizations, the auditors need to document the audit planning process. The documentation of audit planning includes the entire necessary step that need to be taken at the time of conducting the audit operations (Arens, Elder & Mark, 2012). The total audit process continues as per the various steps of audit planning. The auditors need to follow all the processes to avoid end time difficulties. In the above two pictures, it can be seen that all the members of the audit team is busy with the audit process as time is coming to publish the audit judgment. The raised question is that whether anything is left undone in the audit process (Knechel et al., 2012). As per the below two pictures, the auditors are not sure whether anything is left or not. From the above situation, it can be implied that the audit planning process is not done correctly and not all the steps in the planning process is followed. For this reason, the members of the audit team have to face many difficulties, as they have no idea what to be done next (Ittonen & Peni, 2012).
References
Aikins, S. K. (2013). Government Internal Audits: The Determinants of Quality Supervisory Review of Audit Documentation. International Journal of Public Administration, 36(10), 673-685.
Arens, A. A., Elder, R. J., & Mark, B. (2012). Auditing and assurance services: an integrated approach. Boston: Prentice Hall.
Backof, A. G. (2015). The impact of audit evidence documentation on jurors’ negligence verdicts and damage awards. The Accounting Review, 90(6), 2177-2204.
Ittonen, K., & Peni, E. (2012). Auditor’s gender and audit fees. International Journal of Auditing, 16(1), 1-18.
Knechel, W. R., Krishnan, G. V., Pevzner, M., Shefchik, L. B., & Velury, U. K. (2012). Audit quality: Insights from the academic literature. Auditing: A Journal of Practice & Theory, 32(sp1), 385-421.
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