Auditing and Assurance Services: Audit Quality in Australia

This essay delves into the critical concerns surrounding audit quality in Australia, analyzing various excerpts from news articles and press releases to understand the multifaceted challenges faced by the auditing profession. The discussion highlights the potential of advanced technologies, such as AI and data analytics, to enhance audit quality while also acknowledging the significant impact of conflict of interest, which can lead to corporate collapses, as exemplified by the Enron case. The role of the Australian Securities and Investments Commission (ASIC) in promoting audit quality, particularly through scrutiny of the 'Big Four' audit firms, is also examined. Furthermore, the essay explores the impact of PwC Australia's balanced scorecard and the restructured code of ethics, emphasizing the importance of transparency, professional skepticism, and ethical considerations in maintaining audit quality and serving the public interest. The analysis underscores the need for continuous improvement and the adoption of ethical practices to ensure the integrity and reliability of audits in Australia.

Running head: AUDITING AND ASSURANCE SERVICES
Auditing and Assurance Services
Name of the Student
Name of the University
Author’s Note

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Synopsis
The main purpose of this essay is the assessment of four excerpts that includes news article and
press release for discussion about the audit quality issues in Australia. This essay undertakes
detailed analysis of these excerpts for understanding the aspects related to audit quality. It is
mentioned in the essay that audit quality can be improved with the utilization of advanced
technologies in audit engagements. This essay also indicates towards the crucial fact that conflict
of interest is a major barrier in achieving audit quality while this can also cause large corporate
collapses. There is a need for identifying and implementing initiatives by the audit firms to
improve audit quality. This essay also discusses about the roles of restructured and revised code
of ethics in order to enhance the audit quality while maintaining professional skepticism as well
as audit judgments.

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Introduction
It has been argued in the recent years that the audit quality may be enhanced with the
help of advanced technologies using is auditing. It is also considered by many that the presence
of conflict of interest may have major impact on audit quality. All these indicates that audit
quality is a major concern and the main aim of this essay is to discuss about different aspects
impacting the audit quality in Australia. For this, this essay analyses and evaluates the concerns
regarding audit quality mentioned in four specific excerpts that consist of news articles and press
releases.
Discussion
Maintaining the appropriate audit quality is one of the major responsibilities of the
auditors. However, in the recent years, certain issues have been identified regarding audit quality
in Australia. The following discussion involves in the analysis of audit quality related concerns
in four excerpts.
Audit Quality and Advanced Technology
Advanced technology has a positive impact on the improvement of audit quality and this
particular aspect is discussed in the news article named “How Advanced Technologies May
Improve Audit Quality”. The examples of main advanced audit technologies are data analytics,
cloud, Artificial Intelligence (AI) and others (forbes.com, 2019). Billions of dollars have been
invested by the audit firms all over the world for the implementation of advanced audit
technologies because more than 94% of the corporate finance executives have agreed on the fact
that audit quality is improved due to the use of advanced technologies. Majority portion of the

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audit firms have the inclination of using certain technological tools as the primary tools for
conducting audit such as AI, robotic process automation (RPA), data visualization and others.
Since there is growing amount of unstructured data that the auditors have to deal with, the use of
AI enables the auditors to systematically mine this data for identify any kind of manipulation in
them; and this increase the overall understandability of auditing (Byrnes et al., 2018).
After that, this data can be presented with the help of proper graphs with the help of data
visualization tool that assists to engage with the data in more effective manner. In this manner,
the auditors become able to recognize any trend in the large unstructured audit data. After that,
the effective use of RPA plays a major role for the auditors to capture and interpret financial
transactions for the purpose of effective audit outcome. Therefore, the above discussion provides
the evidence of the role of advanced technologies in improving audit quality. However, the
auditors are responsible for guiding these technologies and they must use their knowledge,
professional skepticism and audit judgments while using these technologies (ey.com, 2019). All
these imply that audit quality is improved by the use of advanced technologies.
Audit Quality and Conflict of Interest
The increase in conflict of interest in the audit profession can affect the audit quality and
can cause the collapse of large business organizations like Enron; and the excerpt named “Audit
firms' conflicts of interest could spark Enron-style corporate collapse, former ASIC boss warns”
sheds light on the same aspect (abc.net.au, 2019). Large business organizations line Enron and
others have collapsed because of the presence of corruption and financial manipulation resulted
from the presence of conflict of interest and poor auditing as well as accounting standards; and
this has been argued by the former chairman of the Australian Securities and Investment

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Commission (ASIC), Greg Medcraft. As per him, if there is someone to blame for the collapse of
Enron, that is its auditors because of their failure to identify the reason for such collapse.
He has also mentioned that the challenging nature of the auditors is lacking along with
the lack of adequate professional skepticism; and the development of conflict of interest is the
outcome of such situations. He has also blamed the big four audit firms by stating that there is
conflict of interest between the audit business and consultation business of these corporations. As
per him, it is required to examine and inspect the audit works of the big four audit firms because
of the presence of the major concern that audit opinion has been provided in the absence of
sufficient audit evidence in one fourth case of audits performed by these firms. It indicates
towards the important fact that the audit quality is hampered in the presence of conflict of
interest. This situation can only be resolved from the end of the audit firm by providing sufficient
and transparent audit services to the audit clients and other users of the financial statements.
Audit Quality and Big Four Audit Firms
The Australian corporate regulators have taken the step of disclosing the outcome of the
audit inspection regime for the individual audit firms so the name of the big four audit firms can
come out and this information has been discussed in details in the excerpt named “ASIC to name
and shame big four consulting firms over audit quality” (afr.com, 2019). This excerpt indicates
towards the urgency towards the fact that the big four audit firms are required to take more
effective steps to improve the overall quality of their audit programs. In this regard, the step
taken by the ASIC is the decrease in time period for disclosing the reports of audit inspections of
the individual audit firms. By pointing towards the major necessity to increase the audit quality,
the ASIC has stated the fact that the audit firms must develop or take major steps for bringing
improvement in the overall audit programs (Sikka, Filling, Liew, 2009).

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For this reason, ASIC has undertaken the initiative of disclosing certain measures that can
be used by the audit firm to increase the overall audit quality. All these aspects show that the
ASIC is largely concerned about the quality of audit in Australia as degraded audit quality is
responsible for the collapse of many large corporation. In order to prevent this situation, ASIC
puts the obligation on the audit firms to enhance the audit quality with the help of appropriate
measures. It also indicates towards the fact that the big four audit firms are also required to
enhance their audit quality with the help of appropriate measures (Sikka, 2009). The occurrence
of large corporate collapses like Enron can only be avoided through improving the audit quality.
Audit Quality and Balanced Scorecard of PwC Australia
PwC Australia is the first audit firm in Australia to publish a balance scorecard on their
audit quality and the firm has provided further details on this in the press release named “PwC
releases Australia’s first balanced scorecard on audit quality” (pwc.com.au, 2019). The disclosed
balanced scorecard of PwC Australia includes its performance on audit quality as well as the
results of ASIC’s individual inspection regime. It has been acknowledged by the senior
management team of PwC Australia that there are many factors that affect the audit quality and
the firm has provided major significance to each of these factors through the publication of the
balance scorecard. At the same time, they are the first Australian audit firm that has provided
serious attention to the initiatives of ASIC to improve the audit quality. At the same time, PwC
Australia has also taken into consideration the demand of ASIC for the disclosure of individual
audit inspection results in less time with the aim to enhance the audit quality (pwc.com.au,
2019).
Most importantly, PwC Australia has developed a specific Quality Improvement Plan for
improvising the quality of their audit through taking into consideration the required aspects and

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measures. According to the senior management of PwC Australia, transparency and
accountability are two of the most important tools that can be used for improving the audit
quality. In the disclosed balance scorecard, the performance of PwC Australia has been disclosed
in some of the certain areas like global audit inspection, ASIC audit inspection, non-audit
services and others (Tepalagul & Lin, 2015). This balance scorecard of PwC Australia can be
used as a key tool to analysis the factors that have a large role to play in enhancing the audit
quality. Through the disclosure and publication of this balanced scorecard, PwC Australia has
complied with the fact that they would serve for the interest of the community and investors in
better manner (Mostafa Mohamed & Hussien Habib, 2013).
Quality Audit and Restructure Code of Ethics
Certain major restructuring changes have been bought in the code of ethics for the
accountants and auditors by the International Ethical Standard Board for Accountants (IESBA)
with the aim to bring substantive revision in the code of ethics. The main aim behind these
changes is to make the auditors aware on the appropriate application of these codes of ethics in
the audit profession (ifac.org, 2019). The IESBA has made it easier for the auditors to enforce
and use these code of ethics. Moreover, the IESBA has mentioned the fact that these revised
code of ethics will majorly assist the auditors to solve the complex ethical issues as well as
situations in the audit profession. These new code of ethics have brought certain changes in the
conceptual framework that is majorly helpful for the auditors to recognize, assess and solve the
compliance threats with the assistance of ethical fundamental principles (ethicsboard.org, 2019).
In the presence of these aspects, the overall audit quality can be enhance in the presence
of these restructured and revised code of ethics. It needs to be mentioned that certain crucial
changes are there in the new restructured code of ethics; such as the revision in the provision of

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safeguards for establishing better alignment with the fundamental auditing principles, inclusion
of more strong independence provision of the auditors, new sections in order to prepare and
present the financial information, new guidelines for public practice, key emphasis on the aspects
related to the professional judgments of the auditors and more emphasis on the compliance with
the fundamental ethical principles of auditing. Under the presence of these revisions, there will
be more obligation on the auditors to comply with these principles that will lead to the reduction
in conflict of interest and will improve the overall audit quality (Kaptein, 2015).
Conclusion
The above analysis indicates towards the major aspect that audit quality is a major
concern in Australia that can be resolved with the help of additional initiatives from the audit
firms. As per the above analysis, major advancements in the technologies can ensure the increase
in the overall audit quality. On the other hand, the presence of conflict of interest is hampering
the audit quality which can lead to the occurrence of Enron like corporate collapses in Australia.
For this reason, the ASIC is asking the big four audit firms to take more initiatives to increase the
audit quality; and in order to ensure this, the ASIC has reduced the time to public the individual
audit inspection reports. As per the above discussion, it is believed that the restructured and
revised code of ethics would help the auditors in enhancing the overall audit quality by handling
the complex ethical situations in auditing. As PwC Australia has adopted the policies and
procures of ASIC to improve the audit quality, it can be considered as a good sign in the
improvement of Australia audit quality.

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References
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over-audit-quality-20190806-p52efr
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