Auditing and Assurance in Australia

This article discusses the auditing and assurance profession in Australia, focusing on the challenges and opportunities it presents. It also highlights the need to investigate the practices of the 'big four' accountancy firms through the royal banking commission. The article explores issues such as bribery, conflicts of interest, and customer exploitation, and suggests that stricter regulations and oversight are necessary to protect Australia's financial resources.

Running Head: Auditing and Assurance in Australia 1
Auditing and Assurance in Australia
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Accounting can be considered to be a language of an economy, sector, or an entity in that
it involves identifying, recording, analyzing, summarizing as well as making reports about
financial information. It is on the basing of the above processes that deductions can be made
about the financial status of an economy or an entity. Accountancy firms are responsible for
providing auditing services that can help owners of entities to maintain appropriate means of
financial resource organization and compliance with taxes as a way of preparing for the growth
of their businesses. As such, owners of entities should always consider accountancy firms as
integral partners to their undertaking rather outsourcing costs for their record keeping. Because
accountancy firms do not offer all services that may be desired by an entity, there is a need for
entity owners to interview a multiple of these firms to establish the one which suits their needs
and interests. Australia’s “big four” accountancy firms include; Steve Cannane was considering
Delloite, Price water Cooper, KPMG and Earnst and Young in his article. Cannane, as a British
investigative journalist on activities overseas, assessed the practices that are being exercised by
Australia's accountancy firms (Cannane, 2018).
From his assessment, Cannane asserts that there is a need to put Australia's “big four”
accountancy firms under the spotlight of the royal banking commission as a way of shaping the
nation's accounting proficiency. Banking royal commission is an element which is concerned
with the making of investigations to find out whether financial services among Australia's firms
have been involved in any misconduct in their operations. In case, there is evidence of
wrongdoing, then all the legal proceedings are forwarded to the commonwealth so that culprits
can face justice as a way of protecting interests of Australia’s economy (Cannane, 2018). From
this point of view, Cannane wishes to have investigations conducted into the operations of the
“big four” accountancy firms in Australia as a way of eliminating the existing forms of

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misconduct in their operations. The discussion in the paper will involve identifying the various
forms of misconduct associated with the “big four” an accountancy firm, identifying
opportunities and challenges in Australia’s auditing profession. Besides, the paper will also
evaluate the various policies that have been put in place by Australia to monitor operations of its
“big four” accountancy firms. The conclusion section will involve making a recap of the points
that support the proposition that Australia's “big four” accountancy firms should be put under the
spotlight of the royal banking commission. I agree that Australia's "big four" accountancy firms
should be put under the spotlight of the royal banking commission as a way of shaping the
accounting and auditing practices for the financial institutions. The above proposition is
supported by the following arguments.
Massive conflicts of interest has resulted into bribery incidences among Australia’s “big
four” accountancy firms due to the fact that they sell consultancy services to the same companies
which they are meant to independently audit. Bribery is simply an act that involves offering and
receiving of a valuable item as a way of influencing an action or decision by an individual who
has authority in a legal entity. Bribery incidences among these firms are attributed to absence of
zero tolerance policies against unethical practices like bribery which has created greedy
characters by employees at these accountancy firms. Another element which is making
Australia’s “big four” accountancy firms to engage in bribery to meet their interests is
ineffectiveness of the government’s anti-corruption agencies. These agencies have not
effectively monitoring and evaluated actions of Delloite, Price water Cooper, KPMG and Earnst
and Young whilst selling consultancy services to the various companies. Moreover, bribery
practices negatively contribute to the reputation of an entity or an economy due to the waste of
resources for meeting self-interests. In most cases, staffs at Delloite, Price water Cooper, KPMG

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and Earnst and Young have faked pay slips as well as Medicare cards due to conflicts of interest
arising from the ability to sell consultancy services to audit same companies. As such, it can be
seen that Delloite, Price water Cooper, KPMG and Earnst and Young are greatly exploiting the
companies due to desire to meet their interests at the expense of client firms. It is from this point
of view that the accountancy firms should be put under the spotlight of royal banking
commission so that the culprits who have been engaging in bribery can be brought to face justice
(Mattha 2018). In due course, legal proceedings may help to retrieve some of the financial
resources that had been lost due to the selfish interests of various professional in Australia’s
accountancy firms. Moreover, the retrieved financial resources can be used to facilitate multiple
development projects in infrastructure to meet the interests of the Australian community.
Therefore, the “big four” accountancy firms should be put under the spotlight of royal banking
commission to ensure that bribery practices are eliminated to protect Australia's financial
resources.
Massive interest among these “big four” accountancy firms has also give rise to an issue
of continuous failure to verify the costs of operation among client firms before consultancy
services are advanced unto them. The above claim is derived from the fact that Delloite, Price
water Cooper, KPMG and Earnst and Young are not always considering all the necessary
prerequisites needed before selling their consultancy services to companies. Such a factor has
rather increased the operation costs of the audit client firms because the accountancy firms do
not consider elements like financial strength of their clients. As such, consultancy services that
are sold to audit clients are not able to yield desirable outcomes due to lack of consideration of
the financial strengths of clients. Moreover, these big four accountancy firms are basically
focused on meeting their sales interests without prior need to make use of auditing principle to

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audit companies that make use of their services (Cannane, 2018). The above element gives rise
to a need to subject all the “big four” accountancy firms to the spotlight of royal banking
commission. In the due course the accountancy firms may prioritize interests of companies that
make use of their services through independently undertaking audit functions without
prioritization of their own conflicts of interests. More so, these “big four” accountancy firms
have a tendency of ineffectively auditing client companies due to fear that they may shun
utilizing their consultancy services which has given rise to making of false auditing reports.
Therefore, Delloite, Price water Cooper, KPMG and Earnst and Young should be put under the
spotlight of royal banking commission to ensure that accurate audit reports can be made about
companies.
Additionally, the majority of the banks under these top four accountancy firms have
engaged in customer exploitation practices in the form of inappropriate financial advice that they
advance to the clients. These banks have always promoted financial advice to clients on the
condition that they are to purchase their financial products. In regards to financial information
offered by banks under the “big four” accountancy firms, 75% of the files that were reviewed
indicated that these banks did not comply with the basic needs of clients. The above failure is
attributed to the fact that the banks are prioritizing their interests in making profits by offering
charges on financial advice and products, an element which is unacceptable in accounting. As
such, subjecting the “big four” accountancy firms to the spotlight of royal banking commission
will help to identify and eliminate the above practices by banks as a way of preventing customer
exploitation. Banks under the “big four” accountancy firms may be advised about better practices
that they can use to reap benefits from their financial advice to clients rather than requiring them
to buy their financial products as a condition (Cannane, 2018). For example, the banks may be

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advised to offer free financial advice to their clients so that they widen the market for their
commercial products. In such a case, the banks will be able to realize huge returns without any
customer exploitation incidences. Therefore, Australia's “big four” accountancy firms should be
put under the spotlight of the royal banking commission to shape the actions of banks under
control to eliminate incidences of customer exploitation.
Over the past decade, the Public Company Accounting Oversight Board (PCAOB) has a
critical oversight policy for the auditor to help enhance the quality and independence of audits.
The policies have been aimed at facilitating the role of exhibiting professional auditing standards
in all the accounting processes of potential investors. It is through the above policy that auditing
professionals are informed about the purpose of safeguarding investors’ financial resources from
misuse by offering professional advice before investments. Australian auditing professionals
have an opportunity of being hired by companies to assure potential investors that the available
presentation if not false. Moreover, investors develop the confidence to inject their resources into
an entity basing on the performance that is delivered by an auditor. In this regard, the auditors
have an opportunity of reaping desirable benefits from their duties in the form of audit fees and
allowances when they are hired by companies which can help to facilitate their welfare and
needs (Ey.com, 2017). As such, a professional auditor stands higher chances of earning huge
incomes from part-timing at various companies since their services are only needed on a partial
basis. Therefore, undertaking an auditing profession in Australia in this 21st century makes an
individual has increased prospects of earning significantly vast amounts of remunerations from
his or her services.

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Additionally, Australian auditing profession enhances the prospects of public trust in the
ability of an auditor to critically evaluate and assess any given assertion basing on expertise in
the subject matter and independence. In such a case, an auditing professional has increased
prospects of attracting more clients for his services when he attains public trust after effectively
and independently examining assertions using his expertise. Because the assurance needs of the
public are ever increasing, then the ability to gain public confidence through auditing gives this
profession a cutting edge over rival professions (Ey.com, 2017). Therefore, auditing professional
in this era equips an individual with an opportunity to realize maximum revenue from the
expanded base of audit clients.
Furthermore, Australian auditing profession provides an opportunity of increased gains
due to a widened public commitment to the achievement of capital formation for long term
purposes. In this regard, the auditors have a chance to meet the assurance needs of the public and
the government in regards to safety, economic, environmental, and social standards that need to
be adhered to. For example, governments and firms would wish to have an assurance that the
available resources fully meet the needs of their projects with no or fewer prospects of corruption
(Ey.com, 2017). Therefore, the auditing profession has an opportunity of acting as watchdogs for
public projects to ensure that all resources serve the intended purposes.
However, slow rates of economic growth in Australia pose a severe challenge to the
auditing profession in regards to the market for its services. The above problem is attributed to
the fact that the majority of the audit clients like firms and individuals are making use of cost-
minimizing techniques to realize relatively higher levels of output and profits from their
undertakings. Because audit services are always utilized at a cost in the form of fees and
remuneration, the majority of the audit clients have viewed such services as factors that increase

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their costs of production. Such an element has made a significant number of audit clients to shun
audit services as a cost-saving technique given that any firm always aims at minimizing costs to
realize maximum possible returns. As such, the overall demand for audit services in Australia is
on a deteriorating trend due to unfavorable economic conditions, which are making firms to
utilize cost reducing techniques (Sikka, 2009). From the above discussion, it can be seen that
Australia's auditing profession is faced with a challenge of the limited job market due to
unfavorable economic conditions.
Another challenge to the auditing profession is the shift in demand by audit clients from
regular audit services to value-added audits. Value-added audits are making use of the currently
used standards and regulations in auditing so that auditors can gain confidence in the interests of
the public and the market. Moreover, value-added audits are aimed at ensuring sustainable
growth and development of practices used in auditing so that firms can be able to flourish in their
undertakings when they make use of audit services. To achieve value-added audits, audit firms
are required to undertake qualitative changes in their audit practices as a way of enhancing their
effectiveness and communications with clients. Some of the qualitative differences are reducing
the set high audit fees as a way of encouraging utilization of audit services by firms. However,
audit firms in Australia are not making qualitative changes in their practices, which are limiting
facilitation of the highly demanded value-added audits (Sikka, 2009). In such a case, the auditing
profession is faced with a challenge of producing auditors who have excellent knowledge about
highly demanded value-added audits due to reluctance by audit firms to undertake qualitative
changes.
However, current regulatory efforts to improve the audit quality in Australia happened in
2012 through the Audit enhancement Act, which implemented several remedies that were

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formulated by the Treasury. Enhancement Act required all audit firms to make annual reports
about their transparency as a way of improving the audit quality in Australia. All firms that were
conducting audits for more than 10 Australian business entities were required to abide by the
above regulation as a set standard for enhancing transparency in auditing (Sikka, Filling, and
Liew, 2009). The above regulation was put in place to curb incidences of making false
documentation about various audit practices that are executed by audit firms within Australia.
Besides, changes were made in the independence roles of an auditor as a way of
enhancing the quality of auditing in Australia. In this case, the Enhancement Act was used to
revise the functions of an auditor at financial reporting center, which involved providing strategic
advice on policies to professional accounting entities. Also, processes that are utilized by
auditors in Australia to comply with professional prerequisites and reviews on quality assurance
are part of the recent regulations to improve auditing quality in Australia (Ey.com, 2017).
Conclusion
Australia's “big four” accountancy firms should be put under the spotlight of the royal banking
commission for the best interesting of the auditing processes within Australia. Banking royal
commission plays a role in making investigations and identifying any unethical practices like
bribery that might have happened in the financial sector. In due course, culprits of unethical
practices are subjected to legal proceedings which can help to recover hidden financial resources
to facilitate other development projects of the government. As such, subjecting the “big four”
accountancy firms to the spotlight of royal banking commission is likely to protect Australia's
financial resources from mismanagement. Despite the challenges faced by the auditing
profession in Australia, the profession offers significantly fruitful opportunities to auditors who

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help them to flourish in the job market. The quality of auditing in Australia is still poor due to
unfavorable economic conditions in spite of the recent attempts to improve its overall quality of
accounting through the Enhancement Act.

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References
Cannane, S (2018). Banking royal commission: 'Big Four' accountancy firms 'heavily conflicted
should be under inquiry spotlight: Retrieved from https://www.abc.net.au/news/2018-06-
25/banking-inquiry-should-investigate-accountancy-firms-brooks-says/9904592
Ey.com, (2017).How artificial intelligence will transform the audit: Retrieved from
https://www.ey.com/en_gl/assurance/how-artificial-intelligence-will-transform-the-audit
Mattha, B., 2018. Audit sector faces inquiry as minister points to deficiencies: Guardian.
Retrieved from: https://www.theguardian.com/business/2018/sep/29/uk-mulls-audit-
sector-reform-after-minister-admits-deficiencies
Sikka, P, Filling, S and Liew, P. (2009) "The audit crunch: reforming auditing," Managerial
Auditing Journal, Vol. 24 No.2, pp.135 – 155.
Sikka, P., (2009). The financial crisis and the silence of the auditors: Accounting, Organizations
and Society, Vol. 34(6-7), pp. 868-873.