THE ACCOUNTING AND AUDITING

Running head: ACCOUNTING AND AUDITING
ACCOUNTING AND AUDITING
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Summary of the current scenario
The audit quality can be essentially described as the key elements which generally tend to
create such an environment which will maximize the efficiency of audits and ensure that the
different auditing initiatives are performed on a consistent basis. As the information and
technology domain has advanced to a great extent, the concerns about the maintenance of audit
quality have increased to a great extent (Andon, Baxter & Chua, 2015). Hence, the essay will be
highlighting such concerns and base the discussion on certain examples which focus on the case
studies of the different companies which are involved in the business domain and have faced the
accounting issues in the past. Measures to improve the situation in order to enable the enterprise
to perform well will also be provided.
Introduction
The Australian Securities and investment commission can be understood to be a
governmental body which is essentially in charge of the investigation and maintenance of quality
of the financial reporting. This commission has directed considerate concern in regards to the
audit quality as well as the independence of the auditor. The various inspection policies as well
as programs of the ASIC aims to promote the highest standards of external audits and the
financial reports as well (Tspace.gov.au ,2020). The aim of the enterprise is to ensure that the
quality of the audits can be maintained effectively and the public interest is protected
accordingly.
In light of this, according to Simnett, Carson and Vanstraelen (2016), several issues have
been highlighted in regard to the auditing and improvement of the financial reporting aspects.
These domains generally tend to comprise of the different aspects and technologies like the
Artificial Intelligence, Automation of robotic process and visualization which comprises of
graphical techniques and representations. Hence, the main aim of the essay is to highlight the
issue of audit quality and set examples of the various unethical aspects which take place in the
different organizations.

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Discussion
The first scenario which can be understood to have added advancement to the audit
quality can be referred to as the Artificial Intelligence. The artificial intelligence assists in data
modification and structurization as well. With consideration to this, it is effective to consider
that, the information technology has been able to bring about the structurization of data which
was not present previously. In line with this, the Artificial Intelligence has been able to mine the
data effectively and can monitor the external sources of data as well which thereby works upon
improving and expanding the comprehensiveness of the audited data in an effective manner.
Additionally, the auditing effectiveness can be brought about by the automation of the
robotic procedure. In association of this, it is integral to note that, the auditing procedure has
made rather automated in nature and it can be used as software for interpreting as well as
capturing transaction, manipulation of the data, sending standard responses and integrating the
procedure with other similar processes. According to Kpmg.au (2020), there has been a
considerate change in the auditing and advisory services as well. In consideration of this, it
becomes effective to ensure that, when the work gets streamlined directly, it makes it more
valuable. The reconciliation of the transactions is also possible with the help of the robotic
procedures and may thereby enable the auditors to undertake better decision making and assist in
ensuring that the decision making can be undertaken effectively.
The last aspect which is required to be considered is the visualization. The technology
and related aspects will lead to the data visualization based on the simple technique such as
charts are given. This kind of a visual representation helps in ensuring that, the structured data
can be presented in an effective manner. This helps to improve the decision making of the audit
and other related data as well.
Hence, there has been a considerate improvement in the overall preparation of the data
and other related aspects, however, it is integral to consider that there exists a considerable
conflict of interest in the auditing profession which may lead to several organizational conflicts.
In line with this, it is essential to understand that, the standards of auditing have not been set
appropriately and led to the break-down of the Enron as an enterprise. The point of concern in
this case can be stated to be the fact that the large auditing enterprises are not being detected the

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issues which lie in the domain of accounting (Abc.net.au ,2020). The example of Enron acts as
a typical example of how the auditing quality is a critical subject matter for a last few decades.
This article also talks about human judgement and professional skepticism and the manner in
which the auditors lack the same and fail to identify the errors or risk signals.
According to the issue of Medcraft, it is believed that the different auditors are not being
able to remain skeptical and take up new challenges. The author in Abc.net.au (2020), has also
stated that the different auditing firms are getting changed to the consulting firms which thereby
lead to the lack of talent in the field of auditing. There are a large number of rules as well as
regulations which are present in the field but there exists a lack of competition in the field with
only a few companies being prominent in this domain. It is due to this reason that the enterprise
is not being able to manage the different auditing concerns in an adequate manner. Due to the
lack of competition and related aspects, the big 4 firms not been able to effectively engage in
bringing about better auditing qualities and results (Leung et al., 2015). Hence, the Australian
commission , ASIC, has decided that it will undertake considerate steps to hold auditing
regulations at a regular level and based on this, they will be effectively able to improve the
quality of the auditing and will bring about better management of the different enterprises as
well. However, the current regulations are not enough, the different auditing enterprises would
be required to get involved in the development of other related regulations which would facilitate
better management. Hence, the different auditing enterprises have been asked to display their
overall results which would then result in the better inspection of operations. To this condition,
the different firms like the PWC, Deloitte and KMPG have agreed to do so to uplift the
regulatory awareness and brand image (Tspace.gov.au ,2020). The CPA body also mentioned
that a shift in the Audit regulations need to be brought by the firm.
Concerning the countries like that of Britain, the issue of the auditing quality has become
increasingly popular due to the fact that the Carillion and the Patisserie Valeria collapsed.
According to Leung et al., (2015) , the former British Treasury mandarin, John Kingman the
auditing regulations require significant changes and displayed his regret over the Big 4 for
splitting over the consulting and the audit services into different units of the operations(Knechel,
2016). The separation of the services concerning auditing and the consulting have been
separated and in consideration to this, there has taken place a conflict of interest whereby the

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different enterprises have focused more on consulting and are not taking the matter of auditing or
related auditing quality seriously. Hence, in relation to this, the ASIC as an enterprise has
undertaken the revision of various regulations and rules to ensure that the auditing as an activity
can be carried out effectively.
The balanced scorecard can be understood to be an effective tool which is generally made
use of by the enterprises in order to be able to set their overall goals and missions easily and in
line with this, see to it that, the firm is being able to attain all its objectives. In consideration to
the issue related to the Audit Quality, the auditing giant, PWC Australia has undertaken an
inclusion of the Balanced scorecard so that a true, efficiency and fair picture of the auditing
efforts and task as a whole (Pwc.com ,2020). As mentioned earlier, the Commission, Australian
security and investments focuses critically on the auditing of the listed companies and conducts
an overview of the performance of the big 4 auditing companies. In consideration with this, the
PWC became the first enterprise to disclose the inspection result of ASIC and the manner in
which they carried out the audit quality. It was found from the analysis that the company`s
financial statements are not entirely true and there existed considerable material misstatements.
A considerate amount of details were misstated and hence, this came as a considerable surprise
to the different companies and accounting moguls (Ifac.org ,2020). However, this was even more
surprising because the firm has consistently come up with effective steps and measures to ensure
adequate accounting standards and quality and conducted surveys so as to ensure that the firm
will be able to engage in effective performance.
Out of this survey conducted in 2016 to 2018, it was found that various companies have
not been following the compliances which are required and in concern to this, there have been
various loopholes in the auditing systems of the different companies which then leads to a
disparity and degrades the quality of audits which generally tend to take place. The companies
were not following the rule that all necessary assumptions and considered and established before
undertaking any financial report issue. Hence, all companies are essentially required to include
and disclose all relevant information pertaining to the fact that the audit quality is improved to a
great extent (Afr.com ,2020). Hence, after this analysis and downfall, the PWC arrived at a
conclusion that, a total of six adjustments need to be made accordingly. Moreover, the
independence of the auditing enterprise is essential and the firm would be required to see to it

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that, the external auditor remains independent and does not support the various enterprises while
undertaking the auditing as a procedure. Therefore, in line of this, it is critical to understand
that, the auditing needs to be carried out in a manner such that, the independence of the auditing
can be maintained and additionally, the firm are able to maintain a sound quality of audit in the
market.
According to Forbes.com (2020), Klaus Schwab who is the Executive Chairman and the
Founder of the World economic forum mentioned that the companies are entering into the 4th
industry revolution and this is characterized by a wide range of technologies in regard to the
manner in which people tend to carry out their operations. With respect to this, the technological
advances in various domains such as the artificial intelligence, robotics, biotechnology and
other means are some of the ways in which the nations are being transformed. The article
tends to state that the use of these advanced technologies have been bringing about greater
efficiency of the operations and will assist the auditors by bringing about better results.
According to a survey, the profession of accounting makes use of technology and invests around
$3 to $5 billion every year on the new auditing techniques and technologies which have thereby
assisted and enabled the different auditors to analyze large volume of data which might be
unstructured in nature (Ey.com ,2020). This will help in improving the transparency and in line
with this, assist in improving the audit quality sufficiently. It has to be mentioned that, the
human judgement and the technology have to act together to improve the current scenario and
work on audit quality.
The confirmation responses can also be improved using this and the use of drones for
physical inventories can be made. In addition to the case of Enron, the case of the enterprise
HIH insurance has to be undertaken. In line with this, it is integrate to consider that, the reason
why the companies failed is due to auditing and hence, the profession of auditing has to be relied
upon to ensure long term success and prevention of a crash (Farooq & De Villiers, 2017). The
One Tel Phone enterprise also serves as a suitable example of the manner in which not
complying by ethics and principle accounting standards may lead to a clash on the side of the
firm. In addition to the mistake of the firm, the carelessness on the side of the auditors will also
lead to the fall down of the company and thereby portrays poor auditing quality.

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Hence, the advanced technology will be useful in ensuring that, the auditing and
assurance level can be maintained adequately. With consideration to this, it is essential to
consider that, the auditing scope can be extended with the help of the auditing tools and
monitoring (Bradbury, Raftery & Scott, 2018). Moreover, the technologies also influence the
monitoring and leveraging which further aims to improve the auditing quality.
Another key change and development which has led to the improvement of the steps
which aim to attain sound audit quality can be referred as to the accounting ethics and
standards. The professional body pertaining to accounting and the ethical standard board of
Australia has restructured the code of ethics in the year 2018. The primary reason why the
revision has taken place is to protect the independence of the auditors and work on the audit
quality. APES`s standard 110 states that, it is necessary that the external auditor has prior
knowledge of the rules and regulations so as to maintain public interest and they should not be
engaged in the involvement of any business profession which would influence the key qualities
and fundamental principles of accounting and auditing ethics such as the honesty, objectivity,
integrity and related aspects (Ey.com ,2020).
The public accountants have a duty towards the public as well and hence, they must
prepare true and fair statements. Conflicts need to be resolved by the different auditors and they
will be required to see to it that, they need to consider the facts and remain impartial while
imparting their duties successfully (Arens, Elder & Beasley, 2016). The revised ethical laws as
well as the regulations need to be considered effectively and in consideration with this, it is
important for them to see to it that, the audit quality needs to be strengthening accordingly. It is
the duty of the different auditors to see to it that they are being able to engage in effective
conflict management and related issues in detail. All services which are undertaken by the
firm need to be done by considering the code of ethics and also the rules and regulations.
The study has undertaken an analysis of 6 primary articles. These articles are essentially
focused on the audit quality and the initiatives which are undertaken by the different enterprises
in relation to the same. The first article, by Tspace.gov.au (2020), throws light on the Audit
Quality and related governance in Australia. The Australian association has increased the
vigilance in regard to the audit quality and this has been described in the article. Secondly, the
article by Forbes.com (2020), throws light on the impact of technology on the audit quality and

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how it has improved the same. The article by Kpmg.au (2020) follows a structured format
whereby the related technology in influencing technology has been critically discussed. The
fourth article by Abc.net.au (2020) focuses on the Enron case study and how the firm collapsed
due to misstatements. The article by Afr.com (2020) discussed how the various regulations
criticized the Big four enterprises on their shift towards consulting rather than improving quality
of the audits and lastly, the article by Pwc.com (2020) highlighted the use of Balanced scorecard
for the improvement of operations.
Conclusion
Therefore, the auditing can be considered to be an integral aspect of the profession of
accounting and in consideration with this, it is necessary to ensure that, the auditors are being
able to maintain and uplift the quality of audit in considerable manner. They need to follow all
the regulations associated with it, follow the revised and restructured ethical codes and lastly,
maintain the code of ethics as well. Hence, the study successfully undertook an analysis of the
auditor’s duties, concerns and the independence which would allow them to enhance the audit
quality.

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