Audit Quality
AUDIT QUALITY
A BRIEF DISCUSSION REGARDING THE QUALITY OF ASSURANCE AND AUDIT Student ID: 1204335 Xiaoyu ZHENG
AUDIT QUALITY
A BR IEF D ISC US SI ON R EGAR D IN G THE QUAL IT Y OF A S SUR A N CE AN D A UD IT
A
INTRODUCTION
uditing has inevitably become one of the essential activities in the current business world. It may be attributable to the fact that financial reports still remain the major criteria in evaluating the performance of
the business. Audit quality refers to different denotations in various business sectors; hence in this paper deliberations of audit quality are limited to professional audit firms within the scheme of Australian Securities and Investments Commission (hereinafter ASIC). Due to the complexity of auditing processes, it is reasonable to expect a complicated infrastructure in assessing the quality of the auditing process. To cope with the words limit, two main factors affecting the audit quality most will be investigated in this paper. First factor is the regulation of current auditing practices involving legal frame work, ethical codes applicable to professional accounting bodies, and the regulators of audit review procedures. Subsequently the other factor, intrinsic drivers within the audit firms, will be analysed through the discussions surrounding the practices adopted by the audit firms. A final conclusion and recommendation will be presented to assist future explorations on audit quality topic.
University of Adelaide | AUDITING ASSIGNMENT SEMESTER 1 2012
AUDIT QUALITY
R EGULATIONS OF C URRENT A UDITING P RACTICES
Audit quality cannot and should not be assessed via one simple factor; conversely, many factors which are correlated jointly affect such quality. Three main substances involved in the regulations of current auditing practices are: legal framework, code of ethics and the level of due care and performances from audit firms as well as their regulator. Each of the three substances will be discussed
A BRIEF DISCUSSION REGARDING THE QUALITY OF ASSURANCE AND AUDIT Student ID: 1204335 Xiaoyu ZHENG
AUDIT QUALITY
A BR IEF D ISC US SI ON R EGAR D IN G THE QUAL IT Y OF A S SUR A N CE AN D A UD IT
A
INTRODUCTION
uditing has inevitably become one of the essential activities in the current business world. It may be attributable to the fact that financial reports still remain the major criteria in evaluating the performance of
the business. Audit quality refers to different denotations in various business sectors; hence in this paper deliberations of audit quality are limited to professional audit firms within the scheme of Australian Securities and Investments Commission (hereinafter ASIC). Due to the complexity of auditing processes, it is reasonable to expect a complicated infrastructure in assessing the quality of the auditing process. To cope with the words limit, two main factors affecting the audit quality most will be investigated in this paper. First factor is the regulation of current auditing practices involving legal frame work, ethical codes applicable to professional accounting bodies, and the regulators of audit review procedures. Subsequently the other factor, intrinsic drivers within the audit firms, will be analysed through the discussions surrounding the practices adopted by the audit firms. A final conclusion and recommendation will be presented to assist future explorations on audit quality topic.
University of Adelaide | AUDITING ASSIGNMENT SEMESTER 1 2012
AUDIT QUALITY
R EGULATIONS OF C URRENT A UDITING P RACTICES
Audit quality cannot and should not be assessed via one simple factor; conversely, many factors which are correlated jointly affect such quality. Three main substances involved in the regulations of current auditing practices are: legal framework, code of ethics and the level of due care and performances from audit firms as well as their regulator. Each of the three substances will be discussed
References: Accounting Professional & Ethical Standards Board 2012, About APESB: Mission & Vision, APESB website, viewed 11 April 2012, . Accounting Professional & Ethical Standards Board 2012, Standards & Guidance: Issued Standards, APESB website, viewed 11 April 2012, . Brook, L & Cheng, C & Reichelt, K 2012, ‘Audit firm tenure and audit quality: evidence from U.S. firms’, Social Science Research Network, Social Science Electronic Publishing Inc., viewed 13 April 2012, . Christopher, J & Sarens, G & Leung, P 2009, ‘A critical analysis of the independence of the internal audit function: evidence from Australia’, Accounting, Auditing & Accountability Journal, vol. 22, issue 2, pp. 200-220, viewed 7 April 2012, . Haniffa, R & Cooke, T 2000, ‘Culture corporate governance and disclosure in Malaysian corporations’, Asian AAA World Conference in Singapore, Singapore, viewed 2 April 2012, . Institute of Chartered Accountants in Australia 2011, Auditing Competency Standard for Registration as a Registered Company Auditor, Chartered Accountants, viewed 17 March 2012, . Institute of Chartered Accountants in Australia 2010, Quality review: past, present and future, Chartered Accountants, viewed 22 March 2012, Leung, P & Coram, P & Cooper, B 2011, edition 5th, pp. 131-144, Wiley, Milton Queensland, Australia. The Treasury 2010, Audit Quality in Australia: A Strategic Review, Commonwealth of Australia, viewed 23 March 2012, . 8 8