Myassignment.live is not sponsored or endorsed by this college or university
In the recent few years, the auditing profession has gone through various different changes. The auditors continuously require to effectively respond to the rapid changing demands and complex environment of business, while assisting the entities to continue comply with the growing regulatory mandates as well as confirm to the other requirements. Auditing is an inspection or examination of the different accounting books by the auditor for ensuring that all the departments of organizations are following the documented transaction recording system. This is done by the auditor to determine accuracy of the financial statements that is provided by the entities (Kermiche and Piot 2018). Hence, this report purposes to evaluate the notion that audit is dynamic, followed by the discussion on the way new ways of doing business has posed a challenge to the statutory audit process, and examine the advice by IFAC regarding maintaining audit quality in the uncertain environment.
The world is now changing and the auditors are changing as well. In the current complex business world of globalization, disruption, and technology, the public, regulators, and stakeholders, are scrutinizing the accountability and stability of entities with intensity. It is by harnessing power of the data; entities are seizing the opportunities to identify the trends of business and predict outcomes. Although financial assurance will be always important, the challenging new environment implies that there is a room for Audit to play a much bigger role. It is through accessing every corner of an entity, and its deep knowledge of the strategy, finances, and processes of a company, audit is in the unique position to assist entities see potential for the improvements (Alon, Mennicken and Samsonova-Taddei 2019).
Audits are becoming much more relevant and more efficient. Data analytics and the other technological developments are raising the bar to the next high level in the domain of audit; audits are becoming much more aligned with one’s agenda, more forward-looking, more real-time and more precise; the technology is also bringing stimulating opportunities for benchmarking, and as the emerging technologies, differ from machine learning and blockchain to the blockchain and the predictive analysis techniques, and it become mature, there will be even more potential for reshaping the audit. Digital transformation is happening in the business, and explosion of the data volumes is also happening, the auditors are required to anticipate this. Further, in the world where speed of the change has increased dramatically, reliability and stability of processes, systems, and applications have now become of great significance for the business (Kermiche and Piot 2018).
Each entity is different, an auditor must deliver the best quality of audit and the independent insights. Further, along with providing a high-quality opinion of audit, the audit approach can help to minimize risk, make better decisions, find the opportunities, and help the entity to stay ahead of curve in the challenging business environment. The auditors are now employing innovative technology and data analytics to analyze greater data quantities, dig deeper, and make delivery of high-quality audit. Applications of latest innovations in the technology and data analytics, the auditor intends to deliver real value to the clients; by providing greater insights for the investors and audit committees, actionable intelligence, and help audits becoming more forward-looking and relevant (Ettredge, Fuerherm and Li 2014).
Covid-19 has now changed the manner in which people live their lives beyond recognition. It has thrown a wrench into the business operations all around the world. The recent events have put the world into great disarray. People are either working away from the usual business environment, or working longer hours, or they are not working at all. Considering the fact that the major entities have announced that the distant working could become permanent for most of their employees, the business may not return to the old normal days anytime soon (NEZHYVA and MINIAILO 2020). All these have put great challenges to the auditors of a company. The plans that are put by entities in place to contain as well as respond to the outbreak are most likely to be remain in place for a time-being. The auditors must be prepared to adjust to this particular period in the sustainable way as well as adapt to this new normal (Luo and Malsch 2020).
The disruption is especially challenging for the internal auditors who are performing assessments of risk. Along with the challenges; however, has come the great opportunity to shape “an auditor of tomorrow” that is a next-generation audit model, which encompasses methodology, governance, and enabling technology. Traditional audits are required to be modernized for keeping up with the expectation and requirements of quality from the regulators and society. The auditors play key role in building the trust in algorithms and processes (Menoni and Schwarze 2020). Further, knowledge gained from using technology will also help the management to make good decisions, as well as the boards of the company will have the information required for asking right questions to fulfill their role of supervisor. The auditors can help with the help of using technology in the smart manner to inspire confidence, and empower the change within entities. There is no doubt that the auditors can and must bring new values to the clients. The technology offers great potential that must not settle for less (Cannon and Bedard 2017).
The consequences of Covid-19 on the reporting of financial statements and audit engagement are quite complex, and it have resulted in huge challenges for the management, auditors, and those who are charged with the governance. There is an unparalleled uncertainty level regarding an economy, the future incomes, and various other inputs, which represent thw fundamental elements of the financial reporting (Shahzad et al. 2018). Further, there will most likely be multiple and substantial financial reporting implications of financial reporting that needs to be considered for the reporting purposes in short and medium term. The uncertainty that arises from the current environment may increase the challenge in receiving enough appropriate audit evidence required to form an independent view regarding reasonableness of the estimates and judgment of the management (Ball, Tyler and Wells, 2015).
For the profession of audit, increased complexities of the financial statement reporting as well as related uncertainties and risks, coupled with the rapid shift to virtual operations and controls of business, have challenged delivery of the audit engagements significantly and necessitated the virtual audits. However, while much has been changed, commitment to the professional standards and audit quality has not. The standards of auditing continued to be more significant than ever. Supporting the wellness of people is also of paramount importance, and eventually high audit quality depends upon the high-quality individuals, who work at their best. Exercising professional skepticism and due professional care remains significant in all the aspects of auditing work (Huang et al. 2015).
The process of risk identification and assessment is dynamic and iterative. Based on the new information obtained and audit evidences, the auditors are required to revise the assessment of risk and modify the responses and any further audit procedures. All through the process of engagement, the auditors are constantly required to be vigilant because of fast-changing and the complex situations as it may be required to revisit the identification and assessment of risk in the current situations. In light of changing situations, planned measures to address the threats to independence may also require to be reassessed (IFAC. 2021).
IFAC has put great emphasis on the risk identification and internal controls. The auditors may be required to consider an impact of any changes that is brought on by Covid-19 pandemic on materiality, which includes the basis in which the materiality is determined as per ISA 30. The understanding of an entity’s system of the internal controls that are relevant to audit helps in identifying the potential misstatement. In the current uncertain environment, it is possible that there have been major variations in the different components of the internal controls system, and hence, a deep insight of what is changed will help an auditor in their process of the risk identification and assessment (IFAC. 2021).
Therefore, this report concludes that the auditing has been evolved over the years. The businesses are being disrupted from various fronts, and its effects are trickling down to the audit functions. The new era is demanding new approaches, new thinking, new capabilities, and new skills. It has been analyzed that the key towards this new approach is more than just having proactive management’s involvement but also a continuous collaboration along with the tools, which support more iterative approach so the projects of audit can be adjusted as required to deliver as it has been expected. Further, it has been analyzed that Covid-19 pandemic has put great challenges for the auditors, and they are bound to adjust and adapt to the new normal. This necessitates the auditors to use technological and innovative tools and techniques in auditing. Moreover, it has been analyzed that the auditors are required to remain focus on the audit quality and maintain it, even in the uncertain period. Lastly, it has been analyzed that the auditors must be best placed to provide key insights to the top management and audit committee relating to the impact on risk and opportunity landscape of an entity and to improve the structured reflections on the measures taken.
Alon, A., Mennicken, A. and Samsonova-Taddei, A., 2019. Dynamics and limits of regulatory privatization: Reorganizing audit oversight in Russia. Organization Studies, 40(8), pp.1217-1239.
Ball, F., Tyler, J. and Wells, P., 2015. Is audit quality impacted by auditor relationships?. Journal of Contemporary Accounting & Economics, 11(2), pp.166-181.
Cannon, N.H. and Bedard, J.C., 2017. Auditing challenging fair value measurements: Evidence from the field. The Accounting Review, 92(4), pp.81-114.
Ettredge, M., Fuerherm, E.E. and Li, C., 2014. Fee pressure and audit quality. Accounting, Organizations and Society, 39(4), pp.247-263.
Huang, H.W., Raghunandan, K., Huang, T.C. and Chiou, J.R., 2015. Fee discounting and audit quality following audit firm and audit partner changes: Chinese evidence. The Accounting Review, 90(4), pp.1517-1546.
IFAC. 2021. COVID-19 Resources from IFAC's Network. [online] Available at: <https://www.ifac.org/knowledge-gateway/discussion/covid-19-resources-ifacs-network> [Accessed 6 March 2021].
IFAC. 2021. Summary of Covid-19 Audit Considerations. [online] Available at: <https://www.ifac.org/knowledge-gateway/supporting-international-standards/discussion/summary-covid-19-audit-considerations> [Accessed 6 March 2021].
Kermiche, L. and Piot, C., 2018. The audit market dynamics in a mandatory joint audit setting: The French experience. Journal of Accounting, Auditing & Finance, 33(4), pp.463-484.
Luo, Y. and Malsch, B., 2020. Exploring Improvisation in Audit Work through Auditors’ Response to COVID-19. Available at SSRN 3643823.
Menoni, S. and Schwarze, R., 2020. Recovery during a crisis: Facing the challenges of risk assessment and resilience management of COVID-19. Environment Systems and Decisions, 40, pp.189-198.
NEZHYVA, M. and MINIAILO, V., 2020. Digitalization of audit in the conditions of COVID-19. ?????? ?????, (3), pp.123-134.
Shahzad, K., Pouw, T., Rubbaniy, G. and El-Temtamy, O., 2018. Audit quality during the global financial crisis: The investors’ perspective. Research in International Business and Finance, 45, pp.94-105.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2022). Accounting Principles II. Retrieved from https://myassignment.live/free-samples/acct2023-accounting-principles-ii/financial-statements-of-the-business-file-A1D39FE.html.
"Accounting Principles II." My Assignment Help, 2022, https://myassignment.live/free-samples/acct2023-accounting-principles-ii/financial-statements-of-the-business-file-A1D39FE.html.
My Assignment Help (2022) Accounting Principles II [Online]. Available from: https://myassignment.live/free-samples/acct2023-accounting-principles-ii/financial-statements-of-the-business-file-A1D39FE.html
[Accessed 06 September 2022].
My Assignment Help. 'Accounting Principles II' (My Assignment Help, 2022) < https://myassignment.live/free-samples/acct2023-accounting-principles-ii/financial-statements-of-the-business-file-A1D39FE.html> accessed 06 September 2022.
My Assignment Help. Accounting Principles II [Internet]. My Assignment Help. 2022 [cited 06 September 2022]. Available from: https://myassignment.live/free-samples/acct2023-accounting-principles-ii/financial-statements-of-the-business-file-A1D39FE.html.
Are you confident that you will achieve the grade?
Our best Expert will help you improve your grade
If you are the original writer of this content and no longer wish to have your work published on Myassignment.live then please raise the content removal request.