Improving Independence Within the Auditing Field
A Proposal to Improve Within the Firm
University of Maryland University College
This paper is to discuss an ongoing issue found within the accounting field, but this paper focuses on Arthur Bell in particular and how to go about fixing it. Arthur Bell is an alternative investment accounting firm that focuses on providing auditing, tax preparation, performance analysis, and consulting services for such things as managed futures and hedge funds. The issue within this firm that is being addressed in the paper is the issue of independence. In this paper, the issue of independence is first outlined in order to gain what it is and why it needs to be addressed. Independence is the unbiased relationship between an accounting firm and its’ client. In this paper, it goes on to describe the standards issued by the SEC in order to mitigate the issue of whether or not accounting firms are independent of their clients. The paper discusses why independence is important in the accounting field by citing a well-known accounting scandal. The accounting scandal that was referenced was the Enron and Arthur Andersen incident. Next is the proposal that should be used to correct the issues that can come with not enough independence being present. The paper outlines the three steps that will be needed to complete the transition. The first step was letting your employees know how valued you they are and how they are not easily replaceable. The next step would be to make your employees completely aware of what the change that is about to occur is and why it is happening. The more that your employees are involved the more they are going to help with the transition. The final step of the transition is the actual implementation of the proposed plan. The final aspect of the paper is the final conclusion for this proposal. The paper sums up the issues addressed in the paper and the need for a firm’s employees to be on their side for change to happen and be successful. Firm Background
During my time at Arthur Bell, the thought of whether or not some of the practices could be taken as borderline violations of the independence standard had crossed my mind. First, I’ll give a brief background of the accounting firm. Arthur Bell has been an alternative investments accounting firm since 1974. They specialize in the areas of managed futures, securities and hedge fund. Arthur Bell provides such services as audits, tax preparation, performance analysis, and consulting services (Arthur Bell Certified Public Accounts, 2014).
While at Arthur Bell I was part of multiple audits and had contact with various clients and third party administrators. The biggest thing that stuck out to me was the fact that with each audit the same engagement partner had been on the same engagement for five or more years and there was no indication that this would change anytime soon. This raises the issue as to whether independence is truly being upheld. While sitting in on and conducting various risk assessment calls throughout my career thus far I noticed that at times the conversations can be more personal as opposed to an actual risk assessment call. The engagement partner would treat the phone call as though it were simply a formality since they had known this client for such a substantial amount of time. However, when does that comfort turn around and hurt you and become the Enron incident all over again.
However, the firm does attempt to stress the fact of professional skepticism. This relates to not blindly listening to your superiors at times and to speak up and argue if there is something that you do not agree with or if something does not look right. This in theory is a good tool for those staff that are doing the majority of the work. Unfortunately, one does not take into account that a bottom of the totem pole staff is...
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