Auditing for Engagements and National Levels - myassignmenthelp

Question: Discuss about theAuditing for Engagements and National Levels. Answer: The IAASB (International auditing and assurance standards board) implemented the framework for the purpose of quality of audit and stated the process, input and output as the key elements for the audit quality at audit firms, engagements and national levels for the audits of financial statements. This framework also reveals that the proper communications among the stakeholders of the company are extremely important (Knechel et al. 2016). The IAASB further acknowledges that the main purpose of the audit is to increase the confidence of the potential users of financial statement and it is attained through gathering the required evidence of audit with respect to express the opinion regarding whether financial statements of the company prepared with all the material aspects and as per the applicable framework for reporting or not. Though it is not easy to define the term audit quality, for IAASB it is the key element used to create the environment that maximizes the chances of performing the quality audit on consistent basis. Major elements for the audit quality are recognized by the framework are (1) Inputs (2) outputs (3) process (4) major interaction under the supply chain of financial reporting and (5) contextual factors (Asthana and Boone 2012). Inputs are segregated as the input factors such as (1) attitudes, ethics and values for the auditors that are influenced by culture existed in the audit firm (2) experience, knowledge and skills of auditors and allocated time for performing the audit. under these input factors, the quality elements are organized among those which are directly attributable to - (1) engagement level of the audit (2) jurisdictional or national level and in the audit firms those are operating in the nation and audits undertaken by them (3) level of the audit firm and audits undertaken by them (Gunny and Zhang 2013). Process states that the rigidity of audit procedure and the quality control process have an impact on the quality of audit. Outputs involve the information and reports formally presented and prepared by one party to another and output from auditing process that are not visible generally to outside of the audited company. For instance, these may involve the improvements to the practices of financial reporting and the internal control over the financial reporting which may be derived from the findings of the auditor. Further the audit outputs are generally determined by context that includes the requirements from the legislation (Minutti?Meza 2013). While the stakeholders have an influence on the characteristics of outputs, others have little influence. However, for some of the stakeholders like investors under the listed organizations, report from the auditor is primary output. Under the supply chain of financial reporting the stakeholders are the management, users who are charged with the regulators and the governance. While every shareholder under the supply chain has great impact on supporting the high quality of the financial reporting and the way in which shareholders interact with the audit quality. These informal as well as formal communications are influenced by the context with respect to which audit is carried out. It allows the dynamic relationship that may exist among outputs and inputs. For instance, the discussions among the audit committee and the auditor of any listed company at planning stage will have an influence on the usages of the input that is the specialist skills and the content and form of the report of the auditor with respect to those which are charged with the output that is the governance. On the contrary, for the businesses that are privately owned frequent informal communications may be there that may contribute to the qualit y of audit. Various contextual or environmental factors like regulations, corporate governance and laws have potential to affect the quality and nature of the financial reporting of the audit quality whether directly or indirectly. Under these circumstances, frequent informal communications may be there that contributes to the audit quality. The auditors respond to the mentioned factors while determining the best level of obtaining the appropriate and sufficient audit evidence. As per the IAASB, while quality of the individual audit is influenced by outputs, inputs, processes and the framework interactions, the audit quality framework is not sufficient for evaluation of the quality of individual audit. The reason behind this is that the detailed consideration is required for the matters like timing, nature and extent of the audit evidence that is obtained with respect to risks associated with the material misstatement in any particular company, the exactness of relevant audit judgements and are complied with the relevant standards. An important asset for the audit activity is the credibility of the report to the shareholders. For providing the constructive challenges and credible assistances to the management the auditors the auditors shall be perceived as the professionals. The professionalism requires the confirmation to professional standards set. With the increase in the complexity with regard to the expanding globalizations and regulations, it is quite obvious that the companies will feel overwhelmed while the quality assurance auditing is considered. The concept of Quality assurance auditing is broadly used with regard to the customers, external and internal audits for computing the quality assurance within the enterprise. The biggest challenge for the effective assurance of quality is to assure that the process of correctly mirroring the documented standards (Kwon, Lim and Simnett 2014). Owing to the research cycle or single development for the manufactured product may result into the abundance of the fo rms and documents that the companies establish through the department of quality assurance. Further, it is crucial to audit the procedures of quality assurance regularly to evaluate the effectiveness of the procedures by the management. Conducting the quality assurance audit is not an easy process, specifically when the multiple stages are involved in the audit span. Further, manually scheduling the audit activities may make the process more complicated and results into overlooking some tasks involved in the audit programme. The entire stage of the audit is missed which in turn, results into inaccurate outcome. For avoiding the situation, the tasks of the audit must be automated that will eliminate the risks associated with overlooking the tasks under the audit planning. However, the auditors may schedule multiple programmes for auditing simultaneously that is to be executed without making any compromise in the audit quality or without having any negative impact on the findings. The auditing related to quality assurance focuses on the compliance with the guidelines and regulations that are set by the regulatory agencies (Memis and Cetenak 2012). The companies shall be organized centrally and store the forms and docu ments securely as per the requirements of the regulations in the way that will influence the effective quality assurance. Storing the documents electronically in the virtual vaults will assist to organize the information and data in better ways. Further, the audit findings shall be tracked through the advanced forms of tracking. This will enable the auditor monitoring the real-time audit results. The generated results will be used as basis for the purpose of generating different reports that will state the actual state of business to the management of top level. Further, the system may be configured for automatically launching the processes for rectifying the issues that will surface as the audit result. As the auditing associated with the quality assurance focuses on various risks that may threat the businesses of the company, it will also provide the management with the ways for prioritizing the risks as per the specific areas of business and the impact level (Deumes et al. 2012). Therefore, the organizations will be able to sustain and attain the level of audit readiness in better way. Further, the transparency of the solution will also enable the management to oversight and assist in various types of organizations to ach ieve their goals regarding quality. Assurance and audit of the financial statement plays important role for the company as well as the society. As the regulatory environments and the business evolves are becoming more complex in nature, the commitment to the performance of quality audits are becoming more essential. Various activities involved with the enhancement of audit quality (EAQ) are (1) Peer review (2) standard and ethics (3) enforcements (4) pre-licensure (5) monitoring practice for the future (6) documentation Peer-review is the main activity of EAQ as it reinforces the compliance with the independence, auditing and standards of quality control. Through the personal connections of the companies, the peer reviewers generally positioned in unique way for carrying out the quality messages and assisting the firms in addressing the concern issues. However, if the peer reviewers cannot detect the areas where the audits do not comply with the professional standards, the reviewers may leave the firms with an impression that the prevalent challenges regarding the quality may not pertain with that which in turn, may not recognize the opportunities of the form where the performance can be improved (Eshleman and Guo 2014). Most common issue regarding the quality is the enhanced oversight is not adequate or audit is not documented that indicates the procedures of auditing were not performed or if performed it is not documented as per the standards. For obtaining the sufficient and appropriate audit evidence required for supporting the opinion of audit the auditors shall comply with the audit documentation. As per the standards, the written documentation shall be sufficiently detailed for giving the experienced auditor who was not involved in the audit previously and the clear understanding with regard to the work performed the evidences that were obtained and the conclusions that were obtained (Burnett et al. 2012). As per the standard, the auditor is required to document the (1) timing, extent and nature of the procedures (2) any significant issues, findings and the professional judgements (3) results of the evidences and procedures obtained. Another required activity for audit quality is to follow the ethics and standards to assure the audit quality that will make the report of the auditor more relevant and communicative. In the year 2014, recognition for Code of Professional conduct was completed by the AICPA with the objectivity and integrity to maintain the independence and exercise the competence and professional care while performing the audit and attest the client services (Lennox, Wu and Zhang 2014). Pre-licensure is the step required for improving the skills that includes updating the skills to enhance the assessment concerning the higher order like critical thinking and scepticism to establish and implement the recommendations to concentrate in the audit that will accept the audit procedures to be acceptable at all over the nation (Tepalagul and Lin 2015). Practising the monitoring of future involves the initiative designed for promoting the discussions regarding how the practice shall be monitored may involve into the technology based system which will enable the firms to recognize and correct the potential issues in the future real time. With more transparency and consistency under the valuation procedure, the auditors will be able to review the valuations that are performed by the credential holders that can assess the work more effectively for determining the fair value measurements (Firth, Rui and Wu 2012). The enforcement states that the members from AICPA are involved in the violation of code of professional conduct that is subjected to the disciplines and remediation including and up to the expulsion from the membership of AICPA. Further, the AICPA is collaborating with the NASBA on the initiatives for supporting the work of the Accountancy State Board jointly (Lpez and Peters 2012). Therefore, enhancing the quality of audit is the comprehensive, strategic commitment to promote the service quality. Through the maintenance of audit quality, the auditors can achieve the improvement in the quality and enhanced performance. As the EOQ supports the auditors to improve the quality of the audit, the auditors in turn will be able to support the owners from small businesses, the public, the investors and many more with the valuable and trusted services. References Asthana, S.C. and Boone, J.P., 2012. Abnormal audit fee and audit quality.Auditing: A Journal of Practice Theory,31(3), pp.1-22. Burnett, B.M., Cripe, B.M., Martin, G.W. and McAllister, B.P., 2012. Audit quality and the trade-off between accretive stock repurchases and accrual-based earnings management.The Accounting Review,87(6), pp.1861-1884. Deumes, R., Schelleman, C., Vander Bauwhede, H. and Vanstraelen, A., 2012. Audit firm governance: Do transparency reports reveal audit quality?.Auditing: A Journal of Practice Theory,31(4), pp.193-214. Eshleman, J.D. and Guo, P., 2014. Do Big 4 auditors provide higher audit quality after controlling for the endogenous choice of auditor?.Auditing: A Journal of Practice Theory,33(4), pp.197-219. Firth, M., Rui, O.M. and Wu, X., 2012. How do various forms of auditor rotation affect audit quality? Evidence from China.The International Journal of Accounting,47(1), pp.109-138. Gunny, K.A. and Zhang, T.C., 2013. PCAOB inspection reports and audit quality.Journal of Accounting and Public Policy,32(2), pp.136-160. Knechel, W.R., Krishnan, G.V., Pevzner, M., Shefchik, L.B. and Velury, U.K., 2012. Audit quality: Insights from the academic literature.Auditing: A Journal of Practice Theory,32(sp1), pp.385-421. Kwon, S.Y., Lim, Y. and Simnett, R., 2014. The effect of mandatory audit firm rotation on audit quality and audit fees: Empirical evidence from the Korean audit market.Auditing: A Journal of Practice Theory,33(4), pp.167-196. Lennox, C.S., Wu, X. and Zhang, T., 2014. Does mandatory rotation of audit partners improve audit quality?.The accounting review,89(5), pp.1775-1803. Lpez, D.M. and Peters, G.F., 2012. The effect of workload compression on audit quality.Auditing: A Journal of Practice Theory,31(4), pp.139-165. Memis, M.U. and Cetenak, E.H., 2012. Earnings management, audit quality and legal environment: An international comparison.International Journal of Economics and Financial Issues,2(4), p.460. Minutti?Meza, M.i.g.u.e.l., 2013. Does auditor industry specialization improve audit quality?.Journal of Accounting Research,51(4), pp.779-817. Tepalagul, N. and Lin, L., 2015. Auditor independence and audit quality: A literature review.Journal of Accounting, Auditing Finance,30(1), pp.101-121.