Auditing: Roles and Responsibilities of Auditors and Management

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

1AUDITING
Table of Contents
Introduction...................................................................................................................... 2
Question 1........................................................................................................................2
Reason behind the Statement of G. Medcraft..............................................................2
Purpose and Audit Report of Satyam Computer..........................................................4
Extent of satisfying the Audit Purposes........................................................................4
Question 2........................................................................................................................5
Management’s Role......................................................................................................5
Auditors’ Role............................................................................................................... 7
Conclusion....................................................................................................................... 9
References.....................................................................................................................10

2AUDITING
Introduction
There are different factors contributes to the overall success of the business
organizations and Auditing is considered as one of them. The correct conduct of audit
operations helps in conveying the actual financial position of the business entities to
their major stakeholders (William Jr, Glover and Prawitt 2016). Thus, the process of
auditing involves in the inspection of the financial statements of the business entities in
order to make sure that they are free from material missstements. Stakeholders like
investors, creditors and others make investment related decisions by putting trust on the
financial information of the companies based on the auditor report. Hence, it is the
utmost priority to the auditors to conduct the audit operations by complying with all the
required auditing and ethical standards (Leung et al. 2014). This report takes an honest
attempt to analyse and value the roles and responsibilities of the auditors by referring
the case of Satyam Computer. The collapse of one of the major companies in India,
Satyam Computer, is famous for the misconducts of the auditors and the management.
The aim of the first question of this report is to analyse the purpose of audit report. The
aim of the second part of the report is to analyse the role of both the auditor and the
management of the companies in the process of auditing.
Question 1
Reason behind the Statement of G. Medcraft
From the provided article, it can be seen that G. Medcraft has some major
concerns about the auditor’s roles and responsibilities at the time of the audit operations

3AUDITING
(abc.net.au 2018). Mr. G. Medcraft is the former chainman of Australian Securities and
Exchange Commission (ASIC). The statement of G. Medcraft sounded like a warning
for the Australian accounting authorities related to the misconduct in the roles and
responsibilities of the auditors (abc.net.au 2018). According to him, the users of
financial information are facing difficulties in putting trust on the financial statements of
the business entities (abc.net.au 2018). In this context, it needs to be mentioned that
the auditors are needed to perform certain roles and responsibilities while conducting
the audit operations. The auditors are majorly responsible to plan and perform the audit
operations for the business entities so that they can obtain enough audit evidence in
order to make sure that there is not any material missstements in the financial
statements (Sanderson 2013). If the auditors encounter any material missstements,
then they are responsible for obtaining evidence to know whether fraud or error is
responsible for this or not (Knechel and Salterio 2016).
As a part of the responsibility, the auditors must follow the standards of
Accounting Professional & Ethical Standards Board, APES 110 as it provides all
the ethical standards and principles for the smooth conduct of the audit operations
(apesb.org.au 2018). According to G. Medcraft, the auditors are majorly lacking
professionalism and professional scepticism while performing the roles and
responsibilities. Moreover, G. Medcraft put emphasis on the fact that there is a need for
improving the auditing standards from the side of the big four audit companies in
Australia. He added that the present situation could lead to another Enron kind of
scandal in Australia (abc.net.au 2018). Thus, as per the above discussion, in order to
gain trust on the financial information from the users, the auditors are required to