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Importance of Audit Quality | Report

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Added on  2019-09-30

Importance of Audit Quality | Report

   Added on 2019-09-30

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EXECUTIVE SUMMARYThis report highlights the importance of audit quality and fair reporting by looking at the case ofEnron Corp. Houston, Texas which is one of the biggest American companies and is engaged inthe paper, electricity, and communication and it has become bankrupt in 2001. This fraudhighlights the reformation in the audit function so as to maintain the audit quality and fairlyreporting. Enron scandal has highlighted that auditor should need to understand theirresponsibility as they are performing on the trust of public and should fairly report on thefinancial statement whether they are free from material misstatement or not. The auditorshould work more unbiasedly as the trust of public on the auditors have come down over theyears which should be regained by performing the auditor duties fairly and there is also needfor severe criminal punishment for the white collar crime so that they will think beforecommitting them and it helps to stop them in future.
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CONTENT1.Different Stakeholders interest in the company.2.Independence of Auditors.3.Major Scandal of Enron Corp.4.Importance of Audit Quality in reference to APES 110 Code of Ethics for ProfessionalAccountants.
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INTRODUCTIONThe auditor should perform the reporting function fairly over the financial statements of thecompany so as to minimize the material misstatement of the company. The auditor shouldmaintain audit Independence while performing the audit function so as to report fairly and stopthe Enron scandal in the future by enhancing the auditor role and its reporting function. APES110 Code of Ethics for professional Accountants lay down the ethics such as Integrity,Objectivity, and professional behavior which has to be followed strictly while performing thereporting function. The reliability of the financial statements reporting should be increased soas to save the public from economic exploitation and to regain the trust of the public over theaudit which has lost over the years. This highlights the need of reformation which is necessaryfor the field of the audit so as to regain the trust of the public which has lost over the years andto enhance the audit quality.
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1.) Material misstatement refers to the misstatement in the financial statement which have notidentified and disclosed and which will ultimately affect the decision of the users of financialstatements and may provide economic loss to them. The persons that are interested in thesuccess or failure of the company are called stakeholders. The other stakeholders that arecalled are key stakeholder who is essential for running of the business of the company or of aparticular project. The identification of misstatement primary responsibility is that of themanagement who should maintain proper attitude to identify and disclose and with theprimary responsibility of management the auditor should also maintain the attitude ofprofessional skepticism while performing the audit. The auditor should report fairly on thefinancial statements of the company whether the financial statements are not materiallymisstated and should not provide economic loss to the company. The users of the financialstatements should be able to get fair representations of the financial position of the companyand should take economic decisions accordingly. The stakeholders that are interested in the success or failure of the company are divided intotwo external stakeholders and internal stakeholders where external stakeholders are thosewhich are not involved directly in the running of the business but its interest will be affected ifits operation is stopped and on another hand internal stakeholders refers to the persons whoare involved in the daily operation of the business and all decision for running the company aretaken after his approval and have both financial as well as personal interest in the company.The numbers of stakeholders that are present in the company are creditors, executivemanagement, customers, employees, shareholders, and financial institution. The risk that is
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