Audit Quality, Ethical Frameworks, and Technology's Impact: A Report

This report provides a comprehensive analysis of audit quality in Australia, addressing the impact of technological advancements, ethical frameworks, and regulatory bodies like ASIC. It critically evaluates the issues raised concerning audit quality, including the role of artificial intelligence, cloud services, and data analytics in improving audit processes, while also acknowledging the potential challenges and the need for skilled auditors. The report delves into the ethical considerations, particularly the restructured Code of Ethics, and its role in ensuring quality audits that serve the public interest. It examines past cases like the Enron scandal and the failures of major audit firms, highlighting the importance of auditor independence, competence, and liability. Furthermore, the report discusses how the balanced scorecard approach and the disclosure of audit quality metrics can enhance transparency and accountability. Overall, the report underscores the importance of maintaining high audit quality to uphold investor trust and the integrity of financial statements, and it offers insights into how technology and ethical reforms can contribute to this goal.

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Auditing and Assurance Service
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Introduction
Auditing is one of the most effective factors that help in the determination of various
fraud that is being practised in an organization and prevent them from happening. It takes into
consideration various financial factors in an organization so that there is a better evaluation of
the different states. In recent years, there has been a significant development in the accounting
system by the improvement in technology. This has been a rhetorical factor as there has been a
statement in the last couple of years that there is a degradation in the quality of the audit in
Australia. This has raised various factors into question with respect to the practice of Auditing in
Australia. This essay intends to evaluate and discuss the advancement of technology that has
drastically affected the quality of the audit. The various issues that have raised in the Australian
Auditing sector are to be discussed critically. Finally, the essay will discuss the restructuring of
the code of ethics in Australia, which has helped in proving the effective quality of audit so that
there is better serving towards the interest of the public.
Discussion
Advanced Technology That Has Improved the Audit Quality
The quality of auditing has drastically improved with the improvement in technology
over the year. There are various factors that can rationally improve the quality of auditing in
Australia. The use of artificial intelligence, cloud service and data and analytics has significantly
benefited the financial services. It has been determined that majority of the financial and audit
companies tend to benefit from the use of these advanced technologies. The expenditure on
technology is quite large. It has been estimated that the cost related this technology has raised to
over $ 5 billion in total. Many companies use Robotic Process automation so that the
manipulation in the books of account and the transaction are captured in an efficient manner. It

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was at first being implemented in the advisory and the sectors of tax so that it can record and
determine the issues that are related to it. After the success in the stated sectors, it has gained a
rational use in auditing. The auditors are able to gain effective insights about the client and have
a better analysis of the data (Forbes Media LLC, 2019).
The use of the AI has also been a major contributor towards the Audit quality. It is one of
the most effective tools that is used in Auditing as it manages the data that are unstructured in
form. It mines them and provides an efficient report on the data that has been evaluated. It
provides a report on the transactions that look suspicious and provide mitigation. However, the
team that is overlooking the system need to be prominent enough to match the skillset of these
complex system. The use of the AI helps the auditors to work at ease and improve the analysis
and the factor of judgment in respect of the documents and the data that have been provided by
the company. The use of the AI has further elevated the review of the company contracts and
analyze them to gain information which are accurate and precise for the auditor in respect of
reviewing (EY Reporting, 2019). Another tool that is widely used in Auditing is the use of
Visualization in a graphical factor. The overall data is constricted and the information is
presented in a constricted manner. The charts provide a better understanding of the company
expenses and the trend of income and expenses of the company. The quality of work is rationally
improved by the use of the data from visualization (Chang & Luo, 2019).
The overall factor of the use of the above stated technology only improves the process
that is associated with auditing. Having a good auditor, with good knowledge of the systems will
drastically improve the quality of the audit. The knowledge and the skill that are professional
cannot be underestimated in respect to the advanced technology. A company like PwC has
adapted to the use of balanced scorecard which intends to improve the overall quality of the

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audit. The adaptation for disclosing the ASIC audit will help in creating a better image for the
company in the Australian market. The process of the audit for the company will improve
rationally with this approach and create better accountability opportunity for the company. This
provided a clear understating of the quality, which is being maintained by PwC in respect of its
accounting in Australia. The company will be able to maintain a rational good relation with the
stakeholders and the investors who have supported the company for a long time. The community
will address the improved quality of auditing in a positive manner and create goodwill for the
company and the accounting practice (PwC, 2019).
Issues Raised Over Audit Quality
The quality in Auditing is very important for a company so that there is a proper trust of
the investors and the stakeholders on the statements that are financial in nature. However, some
of the major well know and repudiated audit have faced major backlash with respect to the
quality of the audit that is being provided by them. On the major backlash was found during the
Enron Scandal and the poor quality in respect of the audit. The quality of the audit has been a
major issue in the last couple of years and major companies like KPMG, EY, Deloitte and PwC
were not efficient enough to provide and maintain a rationally good audit quality. The major
issues that have been found were that the Auditors were efficient for providing justification and
evidence for various transactions and standard of regulations were overlooked by the company
(ABC, 2019).
The increase in the conflict is another factor that has affected the quality as the
management are not rational towards the decision that is being produced in the audit. On the
other hand, the employees who are working for a company are not prominent toward their job
and more interested in the consultancy firms, which provides them with much better financial

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ground and stability. The ASIC, on the contrary, does not tackle the issues promptly and creates
a gap between the solutions that is rationally important for maintaining the quality of the audit.
The misstatement of the company in respect of the financial data drastically impact the auditing
quality that is being practised in Australia. The auditors are not able to challenge the problems
that are faced during the audit and this lead to a major problem with scrutinizing the financial
statements. The audit firms are not being checked and regulated in Australia which further adds
to a major problem in delivering and maintaining a rational quality in the process of Auditing
(Sikka, Filling & Liew, 2009).
The lack of quality and imprudent acts in Auditing further adds a notion of suspicion and
lack of trust in the financial statement that is available to the stakeholders. The regulation is
determined to make a rational inspection of the audit firm and the ASIC intends to increase the
publication of the report towards the quality that is being maintained by the audit firms. The
major four audit firm are being targeted so that the trust of the shareholders are efficient towards
the capital market. The social and organizational context are drastically neglected in the process
of the audit, which further degrades the audit result (Sikka, 2009). The model in the auditing has
been a major problem, which further adds to the problem for the ineffectiveness towards the
quality. Cases like the bailout of the UK bank named Northern Rocks shows the lack of
consistency of the auditors towards the financial data. Independency has also added as a major
issue, in respect of the product of tax in companies like KPMG. The liabilities of the private
audit firms has grown rapidly over the last couple of years, which has led to a growing concern
for the Australian audit firms. Finance capitalism has raised rapidly in some of the major
financial companies in Australia, which escalates the low quality of audit in Australia (Sikka,
Filling & Liew, 2009).

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Restructured Code of Ethic for Improving the Quality of Audit to Serve the Public Interest
It has been noticed that PwC realized its first balanced scorecard on the audit quality.
Different Australian firms are includes some features regarding the measures that are used in
maintaining the audit quality. The organizations use the internal inspection findings, adjustments,
and restatement rates to understand the financial statements. According to some scholars, it has
been observed that audits play a vital role in the trusted capital market. In this, the decisions are
made as per the needs of the companies. The financial statement is concentrated by the
companies for improving the audits. It has been noticed that for maintaining the quality of the
audit, a balanced scorecard is said to be appropriate for Australia. As per the study of,
International Federation of Accountants, (2019), ASIC is using an innovative method by which,
its audit quality is maintained. According to the report of this company, 12 percent of the areas
of audit state that ASIC has reviewed the huge number of PwC files. However, the company
states that it did not obtain any of the assurances regarding the release of material misstatement
in the company.
On the other hand, it has been observed that it is being compared to the other 24 percent
across the industry. Along with this, it is also gaining an opportunity to gain 20 percent and
achieved the sixth position among all the firms in Australia. In a similar manner, PWC’s global
audit inspections were also observed in the period from 2016 to 2018 (International Federation of
Accountants, 2019). As per their report, it has been noticed that five samples of files of the
private companies were not according to the PwC standards. However, it has been noticed that it
played a major part in the quality improvement plan. In this case, audit ethics were maintained
and through this, it was helpful for them to continue their work in a better manner. In both cases

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such as in PwC and ASIC, the audit findings were identified and along with this, the internal
inspections for the public companies were also noticed. From the findings, it has been observed
that there were no instances where the financial statement will be restated in the market.
In both cases, the industry average was near about 4 percent, which was based on the
financial reporting of ASIC (Sikka, 2009). This was also as per the surveillance program that
was depended on the public companies. On the other hand, it has been observed that when a
company publishes its financial statement, first of all, it makes some adjustments as per the
needs and in addition to this, it also improves the clarity for improving the quality of the audit.
This process is maintained for keeping the quality of the audit. It has been observed that the
company can gain success if the audit quality is effective enough. As in the case of PwC, it has
been observed that almost six adjustments have been done to the financial statements of those
that are among the listed companies (International Federation of Accountants, 2019). In the
context of these organizations, it has been noticed that after doing the necessary changes, the
audit is being finalized.
As per the study of, Sikka, Filling & Liew, (2009), the quality of the audit is being
affected because of the auditor’s independence, competencies, liability, knowledge, expertise,
and other individual specifications. These are the factors that are needed to be considered as this
may affect the quality of the audit, which in turn, can create a huge impact on the organization’s
success. Another incident has been observed that was related to the Enron Scandal. This
happened during the time of October 2001 and at that time, it was known that most of the
companies of America were involved in some corporate corruption and some means of
accounting fraud (Helliar & Bebbington, 2004). However, it has been noticed that the
shareholders of Enron lost near about $74 billion in this bankruptcy. In addition to this, the

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employees who were working lost their jobs and many of them also have to face some issues
related to the pension. Certain unethical issues created such a negative impact and prevented the
company from achieving growth.
Before it has been noticed that the shares of Enron were $90.75 and above, however, after
the scandal, it was dropped up to near about $0.67 (Sikka, 2009). This impacted the company in
such a manner that the company started collapsing down. The executive of Enron, Andrew
Fastow was later on charged with some of the securities frauds, mail frauds, and wire frauds and
in addition to this, some money launderings were also prevailing at that time. On the other hand,
another company also became a part of such a scandal following the paths of Enron frauds.
WorldCom is said to be one of the biggest accounting scandals and along with this, it is also
regarded as one of the biggest bankruptcies (Sikka, Filling & Liew, 2009).
With the advancement in technologies, companies start spending on some of the telecom
equipment and services. During that time, WorldCom used some of the unethical accounting
tricks for maintaining their profitability but later on, the issue has been identified and the
company has to pay for this. In both cases, the companies lacked the ethics which were needed to
be followed for maintaining the quality of the audit. These ethics helps the companies in giving
their best by improving the quality of the auditing. On the other hand, it is also used for serving
the global interest or increasing the satisfaction of the companies. Through the help of auditing,
the financial works can be preceded forward, which in turn, helps in fulfilling the objectives of
the organization (Sikka, 2009). Thus, it can be asserted that due to this reason, the ethics are
needed to be maintained in auditing.

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Conclusion
From the following essay, it has been determined that the quality of the audit is rationally
important for a company. Maintaining a healthy audit will create a better relationship with the
stakeholders of the company. In the last decade, with the use of advanced technology various
industry has improved their performance rapidity. The growth has been achieved with the use of
Artificial intelligence, Robotic Process automation and visualization. This drastically improved
the quality that is being delivered in auditing and providing rational justification of the financial
data and statements. The drastic degradation in the quality of the audit has been because of the
low standard and regulation in the Australian auditing. Major companies have been accused of
the low standard of quality in their auditing. Many companies have used unethical factors into
their financial statement to improve their positon in the market. The standard has drastically
improved after the code of ethics has been restructured in Australia.

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References
ABC, (2019). News. Audit firms' conflicts of interest could spark Enron-style corporate collapse,
former ASIC boss warns. Retrieved from: -
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various industries. Our animation explains how it can add value to the audit. Summary.
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