Auditing and Assurance Services

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 is based on two parts. It can be seen from the outcome of the first part of the essay
that the Banking Royal Commission needs to conduct inspection on the audit works of the
Big Four audit firms which are PwC, KPMG, Deloitte and EY because of the breach of
auditor’s independence and audit objectivity by providing excessive non-audit services to the
audit client in order to gain huge audit fees. This is a crucial part that the Banking Royal
Commission needs to consider. According to the findings of the second part of the report,
there are both opportunities and challenges in the Australian audit profession. The
opportunities are due to the increased importance of audit and assurance services; and the
challenges are mainly due to increased complexities in financial reporting. However, the
presence of certain regulatory reforms ensures the increases in the audit quality in Australia.

2AUDITING AND ASSURANCE SERVICES
Introduction
The auditing profession involves the systematic examination of the financial reports
of the companies so that the presence of any material misstatement can be spotted in them.
The auditors have the obligation to discharge the specific audit responsibilities in their
profession when they are also needed to maintain the professional integrity as well as ethical
conduct of audit (Chong, 2013). At present, there are four largest audit firms in the world
which are together called as the Big Four audit firms. They are PwC, KPMG, Deloitte and
EY. It can be observed that these audit firms have the responsibility to audit the financial
accounts of the large corporations all over the world since they are renowned for providing
quality audit services to their clients. However, over some years, these four audit firms have
witnessed major criticism regarding the quality of their audit along with the provided audit
opinions (Yaşar, 2013). Many are claiming to examine the audit works of these companies by
the Banking Royal Commission. The main aim of this essay is to examine the validation this
particular claim. The first part of this essay provides specific discussion on the reasons why
the Banking Royal Commission should investigate the audit works of these four banks. The
next part of the essay discusses about the audit opportunities, challenges and recent
regulatory reforms in the Australian audit.
Specific Discussion
The provided article in ABC News shows the recent undertaken attempt of the
Banking Royal Commission to investigate the audit works of the Big Four accounting firms
(abc.net.au, 2019). This part provides the justification on the required investigation on the
audit works of these firms by the Banking Royal Commission. The Banking Royal
Commission is responsible for conducting the highest form of investigation on the aspects
which have importance from the perspective of the public; mainly, it conducts investigation

3AUDITING AND ASSURANCE SERVICES
on the misconducts in the industries like banking, superannuation and others. The
involvement of misconducts leads to the investigation of the Banking Royal Commission.
There are certain factors which are of major importance to the audit profession like
independence of the auditors, non-audit services and quality of audit. Independence of
auditors is both the internal and external independence of the auditors from the audit clients;
and theses interests can be financial interest and non-financial interest (Crockett & Ali,
2015). Audit quality is considered as the time when the auditors properly examines the
financial reports of the clients while maintaining complete adherence to the audit regulations.
Audit quality is related to independence of the auditors since independence of the auditors
from the audit client contributes to the occurrence of quality audit. Apart from the auditing
services, the auditors have been found providing certain other services to the audit clients that
are considered as non-audit services (Gaynor et al., 2016). It is required for the auditors to
charge separate fees for providing non-audit services because these kinds of services do not
have any connection with the audit of the financial statements. Auditor’s independence can
be negatively impacted by the non-audit services.
The provides article in ABC News mentions that the Big Four audit firms are
providing key consultancy as well as non-audit services to their audit client when they have
the responsibility to audit the financial statements of these same companies independently
and this leads to the conflict of interest (abc.net.au, 2019). According to Mr Brooks, the audit
clients use to get major advices in the areas of financial products, financial transactions and
derivative products from the auditors of these big four audit companies. Mr Brooks has
estimated this major fact that that the two-third of the audit fees of these big four audit firms
come from giving non-audit services when the rest comes from audit services. It implies that
the big four audit firms have large reliance on the non-audit services to earn majority portion
of their fees (abc.net.au, 2019).