BUACC5935 Auditing: Technology, Ethics, and Quality Analysis

This report provides an in-depth analysis of auditing, focusing on the integration of technology and its impact on audit quality. It explores the use of AI, visualization, and robotic process automation in auditing, highlighting their benefits and challenges. The report delves into issues of audit quality, examining corporate collapses like Enron, the performance of the Big Four accounting firms, and PwC's scorecard. It also addresses the importance of the code of ethics in maintaining audit quality, emphasizing principles like integrity, objectivity, and confidentiality. The report includes case study analysis and provides a comprehensive overview of the current landscape of auditing, supported by relevant examples and cases. The report concludes with a summary of the key findings and recommendations for improving audit quality.

Running head: AUDITING
Auditing
Name of Student:
Name of the University:
Authors’ note

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Executive summary:
This report is providing an idea about the auditing system of an organization and the
implication of technology in the same field. In case of implication such technicality, an
organization faced some issues that might affect the performance of an organization. Here in
this report, there are four relevant topics that are generally changing the internal audit system
and for evaluating the audit quality. Next, to such problems, this report is providing the code
of ethics, which is relevant for an organization in case of maintaining the quality audit of an
organization. At the end, this report is providing the details analysis of particular issues
according to the audit quality.

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Table of Contents
Introduction:........................................................................................................................3
Discussion:..........................................................................................................................4
Issues 1: Advanced technology in Audit Quality:......................................................4
Issue 2: Corporate collapses on the scale of Enron:...................................................5
Issues 3: Issues regarding audit quality of Big four companies:................................6
Issues 4: Relating to PWC’s operations with implementing Scorecard;...................6
Code of Ethics in relation to Audit Quality:..............................................................8
Case Study analysis relating to Code of Ethics:.........................................................9
The issues relating with audit Work:.......................................................................10
Conclusion:.......................................................................................................................11
References:........................................................................................................................13

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Introduction:
Audit quality is generally considered as the process of systematic examination of a
quality system, which is carried out by the external auditors or some other audit team. It is
one of the vital parts of quality management systems relating to an organization. Generally,
the audit quality is the performance of work that complies with professional standards and
regulatory and legal requirements. It also complies with the quality control policies and
procedures, which apply to the companies. Such systems are required competent auditor in
the case to perform and control audit quality.
In the present scenario using technology relating to maintaining the audit is quite
helpful. Using advanced technologically in auditing usually, considered as a game-changing
opportunity for audit quality. Normally big data analysis enables an auditor to assess the
increasing volume of data. The changes in the audit quality will allow an auditor to
understand the financial reporting, fraud and also operational business risk in the case to
deliver more relevant and specific audit reports. In the case of performing an audit function
properly, an auditor needs to maintain some ethics. Such a code of ethics may influence audit
performance effectively.
This report is providing a discussion about the implementation of technology in case
of maintaining the audit quality. For such purpose, it needs to recognize four different issues,
which is relating to the audit quality. Such issues are like the using of different advanced
technology in maintains audit quality, collapse relating to Enron scandals, issues of four big
companies and the scorecard issued by PwC in maintaining audit quality. The impacts of a
proper code of ethics that influence the organization's audit quality simultaneously.

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Discussion:
Issues 1: Advanced technology in Audit Quality:
Using of Artificial Intelligence
Generally, the researchers of Information technology were found that most
organizations are managing their storage capacities at the level of 50%. The majority of such
storage capacities having unstructured data process and such data are expanding at the rate of
40%-50% over a year. Artificial intelligence (AI) can be used as a systematically process for
those internal and unstructured sources. This artificial intelligence also provides the red flag
if it is found anything that used to violates some of the countries' regulations or vendors'
transactions that may have some suspicious factors and which are previously overlooked.
Such AI is not only engaged in focus to the internal matters but also engaged in monitoring
some of the external data sources like the social media, televisions or any other sources of
additional information that provide helps to expand the audit comprehensiveness ("Forbes
Insights: How Advanced Technologies May Improve Audit Quality", 2019).
Using of Visualization:
In the case of accounting, using data visualization technology provides a graphical
representation of data in a better way to absorb information. With the using of charts and
trend analysis of different years, the audit program can run smoothly and function as per the
requirement. It is also used to understand the report correctly and to make judgments and
decisions on such behalf.
Using Robotic Process Automation:
Robotic Process Automation is one type of software used to locate and analyse
individual transactions. This Robotic Process Automation system is used to manipulate

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individual transactions and also used to send a standardized response through the automotive
communication procedure along with another process. Such software is implemented in case
of Tax and other advisory services. Robotic Process Automation is well-suited in case of
reconciling revenues that is dependent on transactions and task through which an auditor get
some more time to make proper focus on clients. Such Robotic Process Automation system is
used in audits to make it improved, efficient and effective.
Issue 2: Corporate collapses on the scale of Enron:
Greg Medcraft, the Previous Boss of ASIC, before his retirement linked with a
conflict, which was related to the interest and poor auditing quality standards in the Enron
scandal. According to him, there are many large firms engaged in massive collapse, which is
usually undetected by the auditors, Enron is one of the relevant examples of such. He is also
passed comment on behalf of the auditor and the audit quality, which is “the quality had been
a great concern for several years now” and “the auditor is not sceptical enough, and also they
are not challenged quite enough”. Another issue that notified by Medcraft was the
engagement of individual auditors in consulting firms instead of auditing firms. According to
him, most of the accountants are getting involved in consultancy firms because of the
attractive remuneration offers. They are not getting any interest in performing as an auditor in
any audit firm. He also provides another regulation that in the case to provide accurate and
transparent advice required more competition between auditing firms. He also suggests that
in case to generate proper auditing function required a decent audit commission, which is
appointed auditors and also fixed their remunerations (‘Not sceptical enough': Former ASIC
boss warns audit failures could lead to Enron-style collapse", 2019).

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Issues 3: Issues regarding audit quality of Big four companies:
According to the corporate regulator, the four big organizations have some issues
regarding their audit quality, which is needed to rectify in the case to maintain a proper
working environment. Those four organizations are Deloitte, Ernst & Young, KMPG and
PWC. While evaluating their audit quality, it was found that the overall 25% of insufficient
assurance is regarding their audit quality. While the firms are engaged in making efforts to
improve their quality and maintain some consistency in executing the audit program, the
ASIC is suggesting to consider some new initiatives to improve the audit quality and also
indicate to scrutiny the audit report in every 18 months ("ASIC to name and shame big four
consulting firms over audit quality", 2019).
In Britain, the same issues were found regarding the audit quality and practice after
disintegrating of Patisserie Valerie and Carillion. According to former British treasury
mandarin, there is a requirement of extensive changes in countries' audit oversight regime. He
also suggests to concern about the non-audited work, which is generally performed by the
auditors for their clients. He also points out that the regulator needs to take a look at all the
relevant aspects of the organization including culture, ethical and governance while
performing their operations.
Issues 4: Relating to PWC’s operations with implementing Scorecard;
On 29th may 2019 the PwC Australia, released a scorecard on audit quality, which is
the first time for an Australian firm. This report is including the ASIC’s audit inspections,
which is relating to some essential factors of audit quality. Such as internal inspections, rates
of restatement and also adjusted financial statements. Such audit is considered as one of the
critical element of trust and functioning capital market, which is depends on many decisions
based on the organization’s financial statements. Generally, many factors are contributed in

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the case to maintain the audit quality and to improve the audit process; such elements can be
evaluated through the using of scorecards.
The balanced scorecard report published by the PwC was the first report, which is
including ASIC’s audited inspection results. This report is according to the public record, and
also it includes the measurements relating to the quality audit. Followed the published news,
one of the vital people of PwC passed a statement that, through such scorecard report, PwC is
trying to maintain the level of transparency in the audit report("PwC releases Australia’s first
balanced scorecard on audit quality", 2019). Although in a story that was issued by ASIC,
point out some areas where the PwC is needed some further improvements, including some
quality improvement plans. The scorecard issued by the PwC including the following
matters;
Inspected result issued by ASIC: Depend on ASIC’s report; it was found that 12% of
essential areas relating to the audit of PwC’s are not providing any reasonable assurance that
the financial statements are free from any material misstatements.
Restatements: Followed the audit findings issued by ASIC or PwC’s internal inspections
relating to public organizations in between 2016 to 2018, there is no particular occurrence
relating to financial statement which is need to restated.
Adjustments: Usually, a company make some adjustments before publishing financial
statements to maintain the proper disclosures in the audit report. It is considered as one of the
vital parts of the quality audit process. In the year 2018, PwC found average six adjustments
to the income statements and financial statements of such listed companies that need some
proper changes before finalised and published their reports.

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Code of Ethics in relation to Audit Quality:
The code of Ethics is one of the essential and appropriate factors for the professions,
relating to internal auditing procedures. It is considered as one of the vital trusted location
concerning organizations objective, assurance regarding risk management, controlling and
also the governance that implicated in business operations. In the case of maintaining the
audit quality, an organization need to restructure it follow the code of ethical principles that
reflect the public interest ("How the New Ethics Code Will Affect Your Standards | IFAC",
2019). Generally, the factors that influenced the code of ethics of firms audit quality are as
follows;
Integrity: While maintain the audit quality the organizations should follow some integrity as
it is consider as one of the core value relating to code of ethics. Generally while performing
the audit work an auditor need to maintain high standards of behaviour such are like the
honesty, candidness and confidentiality. Followed this principles an organizations need to
rectify their quality audit while performing the internal audit. Such integrity requires to
observe the both spirit relating to auditing and the standards followed the principles relating
to auditing standards (Davies, 2016). In case of effective code of ethics in audit quality
required to observe the principles relating to independence and organizations objectivity,
maintain some irreproachable standards relating to conduct professional performance, make
some proper decisions that influence public interest.
Objectivity: In the case of maintaining the audit quality, the organization needs to follow its
primary objective as the principle of conducting the performance. The internal auditor
generally followed the professional objectivity in case of gathering, communicating
information and evaluating the individual activity that helps to achieve overall organizational
objectivity, in the same way while the selecting the audit quality the organizations need to

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follow such code of ethics i.e. objectivity (Adelstein & Clegg, 2016). Through the
maintenance of proper objectivity the organization make some proper balance along with its
main goal.
Confidentiality: Confidentiality is considered as one of the vital ethical manners that need to
follow by every organization in case of maintains their quality audit. For every organization,
it have some core information for which need to maintain a level of confidentiality,
simultaneously such confidentiality effect the audit quality while performing (Christensen,
2016). However such information needs not to contain anything, which makes any negative
impacts on publics.
Competency: Auditor have a duty to meet the professional competency while performing his
duties, just like the same rule while arranging the quality of audit the organization need to
maintain proper competency level so that the overall organizational goal can be easily
achieved.
Case Study analysis relating to Code of Ethics:
Issue: A, is an audit partner in an auditing firm named, ABC limited liability partnership
firm. One of the important clients of ABC LLP is Z ltd. Z Ltd is a Construction Company.
This company is engaged in major projects that relating to construction work. ABC LLP was
assigned to prepare audit report of this particular company. The company’s yearend was 31
august and ABC LLP the audit firm normally carried out most of its audit work during the
month of October. At that time performing the audit, A found everything was looked fine and
proper, however A noticed one of the important customer of the company’s, was D ltd. and
the auditor is unable to know the amount of work carried out for D ltd. in post year end. A is
only able to know from the financial statement’s that at the company’s year-end D Ltd owed
Z Ltd was amounted to $2,000,000. D Ltd was unable to clear the due payment amount to

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the Z ltd. due to some stalling tactic and which was common in the industry.After preparing
the audit report ABC LLP arranged a client meeting with Z ltd. After the usual and relevant
discussions the auditor asked whether Z ltd has made any provision in relation to the amount
due from D Ltd or not, and if the company has already making relevant provisions than
whether it is presenting in the financial statement or not. However Mr X, Chief Executive
officer of Z ltd, addressed that he does not believe this is necessary and he also informs that
the administrator was provided him an advice that D Ltd will be able to meet all of its current
outstanding debts soon, so it is not necessary to make any provisions for such dues.
Interpretation:
Integrity: An auditor is needed to be faith and honest with his client. He has a responsibility
to provide necessary opinion on behalf of presenting the truth and fairness structure of the
financial statements and also need to maintain the auditing standards while performing his
duties. Here the auditor of ABC LLP is needed to maintain such quality while performing the
audit of Z Ltd.
Objectivity: As an auditor, A should retain his objectivity in order to perform his job.
Competent: An auditor is needed to follow all the relevant standards in case to obtain
sufficient audit evidence relating to audit performance. Here the auditor is needed to perform
the audit as per the audit standards and principles.
The issues relating with audit Work:
Generally, AI uses in various aspects like the home energy systems, investment
portfolio management etc. Simultaneously it is also affecting the accounting and auditing
performance. Through the using of AI, organizations are used to analyse systems for disclose
some human intelligence, which is interlinked with the technology including data relating to a
mining operation, machine learning and also speech and image recognition. Such machine

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learning uses to generate automatically code relating to accounting entries. Through the
creation of sophisticated systems, an auditor can able to improve fraud detection. Such AI
systems are also used to analyse the unstructured data like emails, social media or conference
calls in case of performing the communication system properly. An example of such AI
systems is the using of machine learning tools that allows some humans in case of analysing
the number of contracts, like a lease in a short period.
Followed the same rule while maintain the audit quality visualization, effect
positively to derive the performance relating to audit smoothly. Through the proper graphical
representation of data analysis of an organization, the internal audit system can able to
perform efficiently. Using this way organizations audit quality can be develop, day by day.
Even the using of robotic process automation software provides an innovation in the
performance of maintain audit quality. With the help of such software an organization can
operate their accounting performance smoothly that might provide some efficient help to the
internal audit system.
Another issue, which is representing the poor quality audit performance of four big
companies. Followed the report provide by ASIC, in the present situation the audit quality
and the performance of those four companies are decreasing and they need to followed some
ethical conflicts while managing or evaluating their audit quality. Even while an auditor
perform their duties they need to follow some ethical manner that may influence the public
interest.
In case to maintain the efficient audit quality, an innovative idea was provided by the
PwC, which is implementing the scorecard. Though the using of such scorecard, an
organization can be able to evaluate their individual performance easily. While internal or