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Unformatted text preview: AUDIT TOPIC 3 8-Jul-09 1 1 Ethics, Independence & corporate governance AUDITING & PUBLIC PRACTICE ACCT3101 TOPIC 3 chapter 4 2 Professional Ethics and Independence: Introduction 1. Audit quality, governance & the expectation gap 2. Recent scandals and the reaction by regulators 3. Auditor competence 4. The perception of independence is as important as actual independence 5. Code of Professional Conduct (CPC) replaced by ethical standards APES 110 Code of Ethics for Professional Accountants 6. CLERP9: New independence requirements under Corporations Act 7. Ethical issues change with the changing expectations of society 3 Audit Quality ¡ Technical standards ¡ Accounting concepts and standards (SACs, AASBs, UIG consensus views) ¡ Auditing standards and guidance statements (ASAs, old AUSs) ¡ Standards for taxation, insolvency and management consulting services ¡ Compliance with standards ASA100 preamble to applying standards 3.1 Audit quality, governance & the expectation gap 4 Components of the Audit Expectation Gap Unreasonable expectations of users Inadequate performance by auditors Acceptable standards Approved standards Expectations of users Service provided by auditor 3.1 Audit quality, governance & the expectation gap 5 Audit expectation gap ¢ Gap between auditors’ stated objectives and users’ perceptions as to the role of an audit. Eg: ¡ Belief that an unqualified audit report guarantees the accuracy of financial statements; or ¡ There is no fraud or error; or ¡ It is an opinion on the economy, efficiency and effectiveness of management. ¢ “True and fair” is not defined, hence public and professional expectations differ. 3.1 Audit quality, governance & the expectation gap 6 Expectations gap 1.The roles and responsibilities of auditors 2.The performance of auditors The gap results from differences between the views of auditors and other stakeholders regarding: 3.1 Audit quality, governance & the expectation gap AUDIT TOPIC 3 8-Jul-09 2 7 Expectations gap • The nature of auditing • Application of hindsight • Self-interest of complainants • Self-interest of auditors • Changes in social expectations • Misunderstanding/ignorance of roles The gap is attributed to many different causes: 3.1 Audit quality, governance & the expectation gap 8 Expectations gap Lack of understanding by financial statement users of : Business Failure vs Audit Failure Audit Failure and Audit Risk 3.1 Audit quality, governance & the expectation gap 9 Corporate governance: serving client and public interests ¡ What is corporate governance? ¡ “The system by which companies are directed and controlled” ¡ Sir Adrian Cadbury (Chair of the Cadbury Committee, U.K.) ¡ “The manner in which an organisation is managed and governed in order to achieve its strategic and operational objectives” ¡ The cornerstone of good stewardship and effective management ¡ Len Scanlan, Queensland Auditor-General 3.1 Audit quality, governance & the expectation gap3....
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This note was uploaded on 10/04/2009 for the course BEL 0733983847 taught by Professor Sffgedrow during the Three '09 term at Queensland.
- Three '09