Reasons for Spotlight on Big Four Audit Firms in Australia

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ASSURANCE SERVICES
Synopsis
This essay discusses about the main reasons for which the Banking Royal Commission
should put light in the big four audit firms in Australia. For this reason, certain aspects like
auditor’s independence, audit quality, non-audit services and others are incorporated for this
purpose. This essay also shows the main opportunities and challenges that the Australian
auditors are facing in the 21st century. Some of the recent regulatory attempts for improving
the audit quality includes the introduction of key audit matters and others.

2AUDITING AND ASSURANCE SERVICES
Introduction
The audit profession involves in the methodical analysis as well as examination of the
financial reports of the audit clients so that material misstatements in them can be identified
that occur due to errors and frauds (Knechel & Salterio, 2016). There are certain
responsibilities of the auditors in the audit procedures. The audit responsibilities must be
fulfilled alongside maintaining ethics in the overall audit procedures (Chui & Pike, 2013).
There are four major accounting companies that do the audit of most of the large corporation;
these companies are called ‘Big Four’ audit firm. These companies are PwC, KPMG, Deloitte
and EY. The large accounts of the large companies are audited by these companies due to
their quality services and goodwill in the market. However, there is a major deterioration in
the provided auditing services to the audit clients by these audit companies (Mohamed &
Habib, 2013). Development of major concerns can be seen in the recent years regarding the
auditing services of these four companies and there are claims where it is said that the
Banking Royal Commission should examine and inspect the operations of these companies.
This essay takes an attempt to look into this matter for gaining valuable insight. This
particular essay consists of two parts. The first part analyses the fact that whether the Banking
Royal Commission should enquire the operations of Big Four audit firms. The second part
aims at analysing both the opportunities and challenges that the auditors face in Australia.
The recent regulatory attempts taken for improving the audit quality is another crucial aim of
this part. A conclusion is provided at the end of the essay.

3AUDITING AND ASSURANCE SERVICES
Reasons for Agreeing with the fact that the “big four” accounting firms should be under
the spotlight of the Banking Royal Commission
It can be seen from the provided article in ABC News that the big four accounting
firms of Australia should be put under the spotlight of the Banking Royal Commission
(abc.net.au, 2019). It is needed to examine the main reasons why the Banking Royal
Commission should put spotlight on the auditing operations of the big four Australian firms.
The enquiry of the Banking Royal Commission is considered as the ultimate form of enquiry
in different kinds of frauds and misconducts in the financial services, banking and
superannuation industry. The following discussion shows the main reason for the above
statement.
Auditor’s Independence, Audit Quality and Non-Audit Services
There are three major factors in the auditing profession that the auditors are needed to
take into consider yon; they are audit quality, auditor’s independence and non-audit services.
The auditors are required to maintain their internal and external indepdence from the audit
client and it implies that the auditors should not have any financial and non-financial interest
in the audit client (Sarwoko & Agoes, 2014). Integrity as well as objectivity are two crucial
aspects that need to be maintained in auditor’s independence. Proper maintenance of
auditor’s independence lead to the occurrence of quality that involves the methodical
inspection of the accounts of the client. Performing quality audit is possible when the auditors
maintain indepdence from the audit clients (Gul, Wu & Yang, 2013). Another crucial aspect
of the non-audit services which are separated from the auditing services and the auditors
provide these kinds of services to their clients apart from the auditing services for which they
charge separate fees to the audit client. Audit indepdence gets majorly affected with the
extensive delivery of non-audit services (Arruñada, 2013).