Corporate Auditing

Running head: CORPORATE AUDITING
Corporate Auditing
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1CORPORATE AUDITING
Table of Contents
Part 1: Business Report to the Financial Reporting Council (FRC)................................................2
Introduction:................................................................................................................................2
Differences between non-audit services and audit services:.......................................................2
Advantages and disadvantages of engaging auditors to perform non-audit services from
company’s perspective:...............................................................................................................3
Discussion on whether the auditors should be prohibited from providing non-audit services to
the audit clients:...........................................................................................................................6
Conclusion:..................................................................................................................................7
References:......................................................................................................................................9

2CORPORATE AUDITING
Part 1: Business Report to the Financial Reporting Council (FRC)
Introduction:
In December 2018, the “UK Competition and Markets Authority’s Audit Services Market
Study (CMA)” has published update and recommendations. The main purpose of such release is
to segregate between audit services and non-audit services within accounting firms into various
legal organisations. The proposal is introduced in Australia as well by the Financial Reporting
Council as well. The current report would provide a distinction between audit and non-audit
services along with analysis of involving the auditors for performing non-audit services from the
business perspective. Based on such evaluation, recommendation would be provided regarding
whether the auditors need to be restricted in providing non-audit services to their client
organisations.
Differences between non-audit services and audit services:
An audit could be defined as the statutory requirement for majority of business
organisations, while the non-audit services are mainly voluntary in nature (Arens, Elder and
Beasley 2016). At the time of providing audit services, the auditors are liable to develop opinions
on the accuracy and fairness of the financial statements along with their adherence to local
legislation and global financial reporting standards. This would engage the auditors in the below-
stated activities:
 An analysis of risks related to the business organisation
 An analysis of the internal control adequacy
 Accumulation of evidence for confirming the assertions embodied in the financial reports

3CORPORATE AUDITING
 Design of the processes in order to ensure reasonable expectation to identify material
errors occurring due to fraud (Burton et al. 2014)
 Consideration of whether the organisation is a going concern
On the other hand, non-audit services would not take into consideration the above-stated
activities. The scope of the services is not mentioned in the statute and therefore, it would be
agreed between the organisation and the audit firm. In addition, at the time of providing non-
audit services, a detailed letter of engagement has to be agreed with the client before the
commencement of work (Cohen and Simnett 2014).
Advantages and disadvantages of engaging auditors to perform non-audit services from
company’s perspective:
There are certain advantages that an organisation could have by involving the auditors in
performing its non-audit services and they are enumerated briefly as follows:
Validity:
Many small organisations do not have in-depth overview of the accounting principles.
They prepare the accounting information to the best of their knowledge based on the primary
accounting regulations. The professional accountants could review such information and they
could provide them with an understanding on validity and accuracy of financial information
(Cooper and Owen 2014).
Identification of errors:
The auditors could be used by business owners for identifying errors in their accounting
processes. The business owners might experience issues in reviewing historical financial
information along with identifying trends when errors take place. By using external audits, they