Auditor's Public Interest Responsibilities and Audit Quality

Running head: AUDITOR’S PUBLIC INTEREST RESPONSIBILITIES AND AUDIT QUALITY
Auditor’s Public Interest Responsibilities and Audit Quality
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1AUDITOR’S PUBLIC INTEREST RESPONSIBILITIES AND AUDIT QUALITY
Executive Summary:
The primary objective of the paper is to analyse the effect of material misstatements in the
financial reports of an ASX listed organisation. For this reason, BHP Billiton is taken into
consideration, which is one of the leading firms operating in the Australian mining sector. It has
been analysed that the auditors have obtained significant lessons from the downfall of Enron. If
the auditors are not able to identify, disclose and adjust material misstatements, the effect
would be significant on the key stakeholders of the audit clients. This has mandated the need to
enhance the overall auditing and accounting standards. Moreover, the top four audit firms are
required to undertake initiatives so that the audit quality could be enhanced further. This
would aid in restricting the happening of future collapses like Enron. Finally, the auditors are
required to be maintained to the necessary auditing principles and guidelines.

2AUDITOR’S PUBLIC INTEREST RESPONSIBILITIES AND AUDIT QUALITY
Table of Contents
Introduction:.................................................................................................................................. 3
1. Stakeholder analysis of BHP Billiton:......................................................................................... 3
2. Independence and whistleblowing in relation to auditors:.......................................................5
3. Lessons for the auditors from Enron scandal and behaviour of Arthur Andersen:....................7
4. Audit quality and steps to be taken by the auditors:...............................................................10
Conclusion:.................................................................................................................................. 13
References:.................................................................................................................................. 15

3AUDITOR’S PUBLIC INTEREST RESPONSIBILITIES AND AUDIT QUALITY
Introduction:
Auditing is the method of examining and analysing the financial information of the
organisations in order to ascertain their accuracy and compliance with the prevailing guidelines
and norms (Asare, Wright and Zimbelman 2015). The external auditors have the responsibility
of providing their opinion that whether the financial reports contain material misstatements or
not after conducting substantive audit procedures. The primary objective of the paper is to
analyse the effect of material misstatements in the financial reports of an ASX listed
organisation. For this reason, BHP Billiton is taken into consideration, which is one of the
leading firms operating in the Australian mining sector (BHP 2019). The next aspect covered is
the consideration of public interest responsibilities in accordance with APES 110 while taking
into account whistleblowing and auditor’s independence. The next section would emphasise on
the lessons to be learnt by the auditors from the downfall of Enron. Finally, the report would
shed light on discussing the requirements of the auditors for improving audit quality.
1. Stakeholder analysis of BHP Billiton:
If the auditors are not able to identify, disclose and adjust material misstatements, the
effect would be significant on the key stakeholders of the audit clients. The below-stated
discussion would represent the effect of material misstatements on the stakeholders of Rio
Tinto:
Shareholders: