Audit Quality Assessment-Free-Samples for Students-Myassignment

Questions: 1.Identify and Discuss what you Consider are the key elements that can Impact audit quality. 2.How is Audit Quality Assessed? 3.What recommendations can be Implemented in order to enhance the Quality of an Audit? Answers: Introduction In todays business environment, Auditing is considered as one of the major aspects. Auditing refers to the process of conducting official financial inspections of the financial and accounting statements of the business organizations (Arens, Elder and Mark 2012). More specifically, auditing is the process of examining the financial statements of the companies in order to make sure that they are free from any kind of material misstatements. Thus, it is required for every business organizations to have their financial statements audited (William Jr, Glover and Prawitt 2016). Most importantly, it is the responsibility of the auditors to maintain the quality of their audit program at the time of audit assessment. It can be seen that external accounting professionals are appointed for assessing the quality of audit operations. Hence, maintaining audit quality is important for the auditors. It needs to be mentioned that there are some major factors that have impacts on the audit quality (Lo uwers et al. 2015). At the same time, it is required to follow a certain procedure at the time of audit quality assessment. Thus, the main aim of this report is to analyze and evaluate various aspects of audit quality assessment. The following part of the report discusses various aspects of audit quality and audit quality assessment. 1.Key Elements that has Impact on Audit Quality According to the above discussion, there are certain factors that have impact on the audit quality. Thus, it is required for the auditors to consider all the factors. The major factors having impact on audit quality are discussed below: The first factor is Internal Control. Internal control provides necessary assurance to the auditors for the achievements of audit objectives. For this reason, the auditors need to consider the internal control of the companies at the time of audit operation, as the weaknesses of internal control are subjects to be investigated (ijbssnet.com 2017). Thus, the effectiveness of internal control has impact on audit quality. The next crucial factor is the Size of Audit Firms. Due to the difficulties in the measurement of audit quality, many researchers consider the size of audit firm as a major factor having impact on the audit quality. It has been seen that large audit firms use more powerful tests for assessing the audit quality. As a result of this, large audit firms are assumed to be involved with more specific audit information as compared to the small firms. The next factor is Fees of the Auditors. Many researcher consider that there is a relationship between audit quality and audito rs fees (Knechel et al. 2012). The audit services are considered as quality-differentiated in the competitive market and the quality differentiated are reflected in audit fees. For this reason, the companies are willing to pay higher amount of fees in order to get higher audit quality. The next important factor is Auditors Independence. Independent audit committee helps in the enhancement of external auditors independence and it makes sure that the auditors are free from any kind of managerial influence. Thus, auditors independence is considered as the heart of integrated audit process thus, auditors are able to provide high quality of audit by complying with the principles of auditors independence (Gruen et al. 2012). The next important factor is Reputation of the Auditors. It needs to be mentioned that the reputation of the auditors has direct relationship with the audit quality of the businesses. According to the investors, audit firms having high reputation are able to provide high quality of audit, as they are able to extract the crucial information for auditing. It is considered that companies build reputations by providing high quality of audit services. The next crucial factor is Industry Specialization. It needs to be mentioned that there is a major relation between audit quality and specialization of industry. It has been observed that there are fundamental differences in the characteristics of error detection methods for different industries. For this reason, auditors having expertise in specific industry will be able to provide quality audit services to the companies. For this reason, it is considered as an important factor. The next important factor is Quality and Proficiency of the Au ditors. The main aim of audit operation is to make sure that the financial statements of the companies are free from any kind of material misstatement. In the audit process, the auditors have to conduct different processes like development of audit plan, development of audit workforce plan and others. For this reason, the auditors need to have specific knowledge in various audit factors. Thus, the auditors having high qualification and knowledge will be able to provide quality audit work. Thus, from the above discussion, it can be seen there are many factors that have impacts on the audit quality of the companies. For this reason, it is the duty of the auditors to take into consideration all these above-mentioned factors of audit quality. 2.Audit Quality Assessment Process Audit Quality Assessment refers to the process of the evaluation of audit program of the companies. Thus, it is necessary for the business organizations to conduct the audit quality assessment. Audit quality assessment can be seen for both internal audit and external audit. The audit quality assessment of both internal and external audit is discussed below: Internal Audit Quality Assessment Some specific stages can be seen in the process of the quality assessment of internal audit. The first step is Internal Assessment. This is considered as one of the major factors for the assessment of audit quality. In this process, certain steps need to be followed for assessing the audit quality; they are planning for engagement, supervision, standardize the working processes, procedures for paperwork, review of reports and others. Most importantly, this particular process helps in the identification of the major strengths and weaknesses of the internal control system. In this process, the auditors of the companies have to comply with the principles and standards of Code of Ethics (theiia.org 2017). The second process is Ongoing Monitoring. Ongoing monitoring of performance is considered as another major process for assessing the quality of audit. Certain processes support the ongoing monitoring processes of internal audit. First, it is required to establish the foundation of inter nal audit activity. Second, it is required to have routine practice for assessing the internal audit quality like supervisory review, approval of work and others. In this aspect, it is required to adequate supervision as it is considered as the most fundamental and important aspect for assessing the quality of internal audit. Another important process under ongoing monitoring is the development of Key performance indicators (KPI) (Gavin et al. 2012). KPIs help the investors and shareholders in providing valuable insight into the internal audit process of the organizations. The next process is Periodic Self-Assessment. This particular process helps in ensuring the fact that the internal audit is complied with all audit standards, code of ethics and regulatory requirements. There are several techniques under periodic self-assessment for assessing the internal audit quality. One of the major techniques under this is survey guide that helps in the monitoring of stakeholders input in the audit process. In this aspect, it is required to mention the fact that in both of the processes, it is required to develop effective audit team for assessing the audit quality. These are the major processes for assessing the internal audit quality. External Audit Quality Assessment In case of quality assessment of external audit, the process of different from internal audit. There are four stages in the assessment of external audit quality. The first step is Planning. In this process, the scope and objectives of quality assessment is set for quality assessment. This process also includes the development of quality assessment team. In addition, the review of workplace is also done in this step. The second step is Off-Site Work. In this process, the review of planning document is done. After that, all the necessary documents are also reviewed for audit quality assessment. Lastly, all the survey responses are reviewed. The next step is On-Site Work (theiia.org 2017). This is a major step in the process of audit quality assessment. In this step, the interviews of clients, staffs and stakeholders are done for audit quality assessment. After that, review of all the documents is done on a thorough basis so that they can be summarized. Lastly in this stage, discusses i s done among the assessment team members. This is a crucial stage as the assessment team taken important decisions regarding quality assessment of external audit system. The next step is Evaluation and Development of Report. In this step, the evaluation of external audit process is done against the resources of the companies in order to measure the effectiveness of external audit (Asthana and Boone 2012). After that, all the issues of external audit is summarized so that effective recommendations can be made. Lastly, the draft report needs to be issued. Thus, based on the above discussion, it can be seen that the above-discussed steps are required for the assessment of external audit process of the companies. Hence, the above discussion shows that the quality assessment process of internal audit and external audit is different. 3.Recommendations to Enhance Audit Quality There are certain ways for enhancing the quality of an audit. Some of those major techniques are discussed below. It is recommended that there needs to be effective leadership in the audit process. It is the responsibility of senior auditors to ensure the fact that the auditing staffs have access to all the necessary resources as well as time to solve different audit engagement issues (aicpa.org 2017). In addition, the senior auditors are required to communicate audit code of conducts with the audit staffs on a regular basis. After that, the quality of audit will be enhanced in case the auditors perform sufficient background check of the audit clients before engagement of any audit operation (journalofaccountancy.com 2017). It is highly recommended that the companies need to hire highly knowledgeable audit experts so that quality audit can be performed for the companies. There is a requirement of effective training and education facilities for the auditing staffs; the main aim of this training and development program is to increase the competency on the auditing staffs (Deng et al. 2014). Next, it is recommended for the establishment of quality control department, as it will help to retrain the quality of audit processes in the organizations. Some of the major benefits of having quality control department are the development of accounting and auditing guidance; provide technical consultation; development of assurance policies and others. It is recommended to the auditors that they should streamline their different audit processes (njcpa.org 2017). In this process, it needs to be ensured that all the auditing staffs are engaged with the audit program. Apart from this, it is also recommended that the auditors are required to increase their industry specialization so that they can conduct audit operations in the companies of all industries. Thus, the above are the key recommendations for enhancing the quality of an audit. Conclusion The main aim of this study is to analyze and evaluate various aspects of audit quality in the business organizations. Based on the above discussion, it can be seen that certain factors have major effects on the audit quality of the companies. Some of those major aspects are internal control, size of the audit firms, fees of the auditors, independence of the auditors, auditors reputations, specialization of industry and quality of the auditors. The above discussion also shows the fact that certain processes or steps are followed at the time of assessing the quality of audit in the companies. However, the audit quality assessment process of internal audit and external audit are different from each other; but the main aim of audit quality assessment to analyze and evaluate the performance of audit process. According to the above study, it can also be seen that the quality of audit can be enhanced with the help of certain techniques; some of them are effective audit leadership, sufficien t background check, hiring of knowledgeable experts, training and development program and others. Thus, based on the whole discussion, it can be concluded that assessment and maintenance of audit quality is an important duty for the auditors References Aicpa.org. (2017). [online] Available at: https://www.aicpa.org/InterestAreas/PeerReview/DownloadableDocuments/EAQ-Hlt-Rpt.pdf [Accessed 9 Nov. 2017]. Arens, A.A., Elder, R.J. and Mark, B., 2012.Auditing and assurance services: an integrated approach. Boston: Prentice Hall. 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. CPAs, N. (2017).9 Strategies to Increase Audit Quality. [online] Njcpa.org. Available at: https://njcpa.org/stay-informed/topics/article/2017/01/06/9-strategies-to-increase-audit-quality [Accessed 9 Nov. 2017]. Deng, M., Lu, T., Simunic, D.A. and Ye, M., 2014. Do joint audits improve or impair audit quality?.Journal of Accounting Research,52(5), pp.1029-1060. 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