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Strengthening Independent Audit Recommendations

The document lists five recent recommendations to strengthen independent audits: 1) Require a committee to oversee auditor decisions to provide oversight of what the auditor will report. 2) Require disclosure of auditor payment amounts to investors to ensure transparency and independence. 3) Require auditors to report accounting activities to the issuer's audit committee to improve access to information. 4) Restrict non-audit services to maintain independence between accounting and auditing functions. 5) Create rules separating auditing and accounting firms if certain management personnel recently moved between them.

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Maryam Malik
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261 views1 page

Strengthening Independent Audit Recommendations

The document lists five recent recommendations to strengthen independent audits: 1) Require a committee to oversee auditor decisions to provide oversight of what the auditor will report. 2) Require disclosure of auditor payment amounts to investors to ensure transparency and independence. 3) Require auditors to report accounting activities to the issuer's audit committee to improve access to information. 4) Restrict non-audit services to maintain independence between accounting and auditing functions. 5) Create rules separating auditing and accounting firms if certain management personnel recently moved between them.

Uploaded by

Maryam Malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Q#5.

Identify and list five recommendations that have been made recently to strengthen the
independent audit function. For each of these recommendations, indicate why you support or
do not support the given measure?
 The party to whom the financial services are provided must hire a committee who will look into
the decisions made by the Auditor from Enron in this way the committee will already have an
idea what the auditor is going to provide.
 The money being paid to the auditors must be disclosed to all the investors so that they have a
clear idea, if in any case such details are not disclosed, and there is a very high fees it leads to
the idea that something is not right.
 The firm’s auditor must report to the issuer’s auditor committee the information related to the
accounting activities because the internal auditors must have the access to information that the
external auditors provide.
 The accounting rules must be changed that if they are provided to non-audit services this will
harm the accounting firm independence, there must be independence in all accounting
activities.
 Create rules that an accounting firm would not be autonomous if certain members of
management of that issuer had been members of the accounting firm's audit engagement team
within the one-year period preceding the commencement of audit procedures. In this way the
auditing and accounting firms will operate separately.

Q#6. Do you believe that there has been a significant shift or evolution over the past several
decades in the concept of “professionalism” as it relates to the public accounting discipline? If
so, explain how you believe that concept has changed or evolved over that time frame and
identify the key factors responsible for any apparent changes.
Yes, I believe that over the years the accounting principles have been changed. There is more
professionalism. In the past all the account ting activities were conducted manually, which lead to the
risk of loss of data and human error. The principles of accounting were not that clear with the rules
made by GAAP and GAAS new principles were made which lead to more efficient performance of the
accounting activities.

Q#7. As pointed out in this case, the SEC does not require public companies to have their
quarterly financial statements audited. What responsibilities, if any, do audit firms have
about the quarterly financial statements of their clients? In your opinion, should quarterly
financial statements be audited? Defend your answer.
The auditor must be responsible to audit the financial statements quarterly compared to the yearly
statements. In my opinion the quarterly auditing of the financial statement will help the firm make
amends to all the discrepancies made in the financial statements before the year ends all the
miscalculations would be known to the firm sooner.

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