Technological Advancements, Ethical Codes and Audit Quality Report

This report delves into the critical aspects of audit quality and the transformative impact of technological advancements within the auditing profession. It explores how technology, including Computer Assisted Audit Techniques (CAAT), Robotic Process Automation (RPA), and Artificial Intelligence (AI), is reshaping auditing practices by enhancing data analysis, improving efficiency, and reducing the likelihood of errors. The report also examines the importance of restructured ethical codes in maintaining professional integrity and public trust, particularly in light of past financial scandals like those involving the Commonwealth Bank of Australia and Enron. By integrating technology and adhering to ethical guidelines, auditors can mitigate risks, increase the reliability of financial statements, and foster confidence in the capital market. The report emphasizes the need for auditors to adapt to new technologies and uphold ethical standards to maintain the integrity of the profession and ensure the quality of financial reporting.

Running Head: AUDITING AND ASSURANCE SERVICES
AUDITING AND ASSURANCE SERVICES
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................3
Audit Quality..........................................................................................................................3
Restructured Ethical Code......................................................................................................5
Technology and Audit Quality...............................................................................................6
Conclusion and Recommendations............................................................................................9
Reference..................................................................................................................................10

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Introduction
The auditing has the principal function for enhancing the degree of the confidence
that is felt by the users of the financial statements of the company. Achieving the higher
standard of the audit quality helps in building up the trust as well as confidence in the
profession of audit. However, growing number of scandals has raised the questions regarding
the credibility of the professions of the auditing. Moreover, the new technological
development is at the rapid pace because of the increasing digitization of the world. The
abilities for gathering the more data as well as analyzing it in the increasing sophisticated
ways is bringing the exciting new possibilities of the businesses of all the kinds (ABC News.
2019).
In the professions of the auditing, technological development is the powerful driver in
the improvement of the auditing quality. Now, the auditors are embracing latest technology to
provide greater level of insights and the analysis. Technology promotes the business
efficiencies, offer connections points to customers and accelerates time to market that was not
before. These innovations have increased the level of the expectations to have much more
relevant, timely as well as accurate information on business performances as well as assured
corporate reporting. The quality of the audit is related with delivering the appropriate
opinions of professions, which should be reliable, independent and understandable as well as
it should be supported by sufficient level of evidences and the objective judgments.
Therefore, this assignment would discuss regarding how technological advancement would
help in improvement of quality of audit.

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Discussion
Audit Quality
Auditors plays major role in the contributions towards the creditability of financial
statements for which they are reporting. The audit that is of higher quality helps in supporting
the financial stability. The quality of the audit is known to be fundamental to maintain public
trusts and confidence. It is the key on which the reputation of the audit professions stands.
The quality of the audit is the foundation to instill the trust and the confidence in the capital
market (Dowling & Leech, 2014). In the recent past few years, the need for the auditors to
provide higher quality services has been increased. It is especially, because of the growing
number of the financial scandals. In almost all the scandals, the auditors has played major
role. There is great effect of the audit quality on the creditability of the financial statements,
while taking into considerations appropriate level of auditing quality by stakeholders
(Australian Financial Review. 2019).
In the recent years, auditors use to take large sum of auditing as well as non- auditing
fees, which have raised number of questions relating to quality, independence, values, and
economic incentives of the auditors. The conventional approaches of quality of audit are not
complete. There is quite less attention paid by on the social and organizational context of
auditing. The conventional approach makes the assumptions that there is the diversification
of the companies in the new forms of investments and complex financial instruments.
Therefore, it becomes quite difficult for the auditing firm for audit the transactions in
traditional way (Forbes.com. 2019).
During year 2000, the sequence of scandals one by one has raised serious questions
and concerns on the audit quality. As the result of which, huge reforms have been started in
the field of the audit, which has raised the concern to increase confidence in the financial
market. The first example in this case is of Commonwealth Bank of Australia. In between

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2003-2012, the company has made the provisions of unsuitable financial advices to large
number of customers. They have also done continuous delay to provide compensations to
victims of the fraud case. This bank was having greatest failure, which has allowed for the
money laundering. The major fault in this scandal was of the audit committee who has not
taken into considerations the findings of audit in the serious manner
(journalofaccountancy.com. 2019). The CEO and chairman of Commonwealth bank of
Australia were found guilty in this money laundering case and charged by the banking royal
commissions. One of the other major criminal behind using the teller machines for laundering
sales proceeds out of country was Yuen Hong Fung. The attempt was made by him to open
account with the bank with the several identities. In this case, intelligent deposit machines of
the bank were used to deposit the amount of $670,420 in the single day. The particular case
of the money laundering by the bank has shaken the business and has thrown light on the
behavior of the banking sector of the nation (Ifac.org. 2019).
The second case of Enron scandal was the biggest scandal till date. The scandal of
Enron has resulted into the company’s bankruptcy and along with this there was dissolution
of the one of the largest auditing firm of Arthur Anderson, who was the auditor in Enron
Corporation. Arthur Anderson was found guilty of the overlooking the financial statements of
the company. The author was being charged up with the federal charges to destroy thousands
of documents, which were related to Enron Corporation (Gaynor et al. 2016). As the
company’s auditor, he was responsible for damaging the company after being negligent on
his part and involving in the breaching of standards related to presentations of the financial
statements, which was considered unfair as well as not accordance with ASB as well as ACA.
In the case of Enron, their executives have attempted serious fraud by showing profits even
company is huge loss. The company’s executives were involved in overstating stock prices,
manipulating facts as well as material misstatements. The substantive test was not performed

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by the auditor Arthur Anderson. He was not directly involved in assisting the company
towards wrongful act; however, negligence of audit has lead to the dissolution of both the
company. This case has raised serious concerns of auditors’ quality (Lennox, Wu & Zhang,
2014).
Therefore, both of the cases have one thing in common that is auditors’ quality. The
past few years has shown great decline in auditing quality. The reductions of these risks in
auditing professions will only be possible with the help of replacing the traditional approach
of auditing with the new approach of auditing. This new approach in the auditing is
introducing and integrating technological aspects in the practices of the auditing. Hence, the
technological advancement would be able to reduce any kind of likelihood of errors in audit
work and it helps in increasing the probability of discovery. The audit risks can be reduced
with the help of practicing audit with the help of current technology. ASIC chairman has
given warning regarding escalating interests conflicts in the global auditing professions
(Abbott et al. 2016).
Restructured Ethical Code
The fundamentals principles of the ethical code are based on the aspects such as
integrity, professional behavior, professional competence, due care as well as confidentiality.
These aspects help to establish standards of behavior that are expected in professional
accountant. This helps in reflection of behavior recognition of professions of the public
interests responsibility. It is because of the rise in the number of scandals, the need for
following the ethical code of conduct has become necessary for all the organizations as well
as respective accountants (Christensen et al. 2016). The accountant of the company knows
regarding what is right and wrong, which is already learned by them from education as well
as the training. These accountants should use their power in the right manner that is by
following ethical perspective in discharging their duties as well as responsibilities. Therefore,

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for maintaining ethical standards of accounting, there is the requirement for having the core
knowledge of ethical code of conduct (Ettredge, Fuerherm & Li, 2014).
The fundamental principles that are laid down in the restructured code of ethics
enhances the audit quality with the conceptual framework enhancement, which is consists of
extensive level of the revisions for safeguarding the code throughout. It further helps in the
better alignment to threats. The restructured ethics strengthens independence provisions in
relation to longer-term association of personnel with audit clients. It emphasizes upon
importance of understanding of facts and the circumstances while doing the exercise of
professional judgments. The restructured ethical code helps in explaining how complying
with fundamental principles supports professional skepticism exercise in audit and other
engagements assurances (Ifac.org. 2019). Hence, following are certain restructured and the
revised IESBA cods and the ethical codes for addressing the professional accountants:
IESBA code adoption.
Professional skepticism meaning.
Fundamentals and Independence.
IESBA roles in setting ethical standards for accounting professions.
Technology and Audit Quality
The advancement in the technology in auditing is offering great level of promises. It
is with the help of technology such as data analytics, data accessibility has been increased.
However, apart from the technological enhancement, still human intervention is required to
filter the data, communicate as well as advise the clients regarding the findings of technology.
The technology has completely changed the way the operations of the business and the way
the data are being analyzed. The technological advancement has opened the new possibilities
of the collections and the analysis of data (Brown-Liburd, Issa & Lombardi, 2015). The

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traditional approach of auditing was related with combined risk assessment with the help of
substantive sample testing and control assessment. However, with the current technology in
auditing, transactions full potential can be tested. The relationship between audit partner and
the advice sources of valuable business are leveraged by the corporate. The machines
learning tools aids to provide more detailed analysis of red line issues of business and helps
to offer great potential solutions (Hall, 2015).
Computer Assisted Audit Techniques- The technique of CAAT is one of the well-
known tool, which has gained good level of importance in the information technology
audit professions. CAAT uses the basic offices productivity software, for instance
word processors and spreadsheets, text editing programs and the advanced package
software such as intelligence and statistical packages. The tool of CAAT helps the
organizations to work in efficient as well as in the productive way. Moreover, this tool
supports the forensic accounting, where large sum of amount are being diverted
towards analytical tool, which prompts whenever tool detects any kind of fraud
(Kilgore et al. 2014).
Robotic Process Automation- The techniques of robotic process automation uses
software to capture and interpret transactions, data manipulations, sending
standardized responses and automating the communications with other processes.
This particular system is widely used in tax as well as advisory services. Moreover,
increasingly, it is getting deployed in the practice of audit (Chen et al. 2014). It is
because the operations of the organizations are streamlined as well as workforce is
directed for having endeavors of higher value added. This technique suits well in
reconciliations of the transactions, which is based on revenue or tasks of more routine
nature rather than allowing the auditors to focus on clients, data analysis as well as
gaining new insights from organizational information (Mahzan & Lymer, 2014).

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Artificial Intelligence- The techniques of artificial intelligence promises to be game-
changer for the different industries with the help of adding value to the practices of
audit. It covers variety of interlinked technologies, which consists of machine
learning, image recognition, data mining and others. It explains computing system
that provides certain human intelligence form. Machine learning is its biggest
example because it would be used to automatically code accounting transactions
entries (Bridge et al. 2014). It allows human to ask better questions and more interact
with company’s board, audit committee as well as chief financial officer to add value
in the processes of audit. Further, artificial intelligence monitors external data sources
such as audio-video sources, social media and television for any further additional
sources. It helps in expanding the effectiveness of audit.
Visualization- The technique of visualization is based on the approach that states that
information can be enhanced if it is presented graphically. It is having greater impact
on auditors because it helps in giving greater insights into systems, transactions and
trends. It allows making better judgments and the decisions, which provides the
results in higher quality of work (Faulds et al. 2016).
Therefore, technology is changing the way professional of auditing use to deliver their
services. It has helped in transforming professionals of the accounting by having potential to
revolutionize the auditing. The techniques such as data analytics, robotic process as well
artificial intelligence are some technologies, which has affected the traditional auditing
process in worst manner (Dzuranin & Mălăescu, 2015). The recent advances in the
technology of audit has promised significant benefits in auditing profession with number of
key drives by signaling the requirements of the technological changes in audit. The key
drivers are changes in the models of business, shifting towards automations, volume of data,
proactive approaches and forward looking approach of audit. These technological

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developments requires the auditors for more technically sound to continue with giving
services to the business as well as clients with higher audit quality (A. Vasarhelyi & Romero,
2014).
Conclusion and Recommendations
Hence, it is concluded from the analysis that audit quality is the biggest concerns in
recent times because of the increase in the corporate scandals in which major role is played
by the auditors. Further, it can be said that audit, its quality, information technology plays
vital role for ensuring integrity and reporting of financial reporting of the organization to
avoid as well as prevent any type of further financial failures, for instance the case of Enron
and the Common wealth bank. Moreover, restructured code of ethics sets out the fundamental
of the standards, which needs to be followed by the professional accountant in discharging
their duties as well as responsibilities. This improves the auditors’ quality in exercising
professional judgments’ in the audit as well as other assurances engagements. At last, it could
be concluded from the analysis that with the help of integrating the system of artificial
intelligence in auditing practice, auditor would be doing their job in much simplified as well
as simpler way. Therefore, audit quality of the auditor could be more enhanced with the help
of the human judgments and artificial intelligence by the analysis of more deeper and broader
way of the data generated by the system.
The recommendations should be to develop sound and strong accounting and auditing
guidance as well as guidance that are specific for the industry. In case of engagements of
higher risks, steps should be taken to perform reviews on engagement quality control. Lastly,
auditing firm needs up gradation and integration of traditional techniques of auditing with
modern techniques for giving much better results such as data analytics, block chain as well
as artificial intelligence.

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