Communication Strategies in Accounting & Auditing Term Paper

Thesis statement: communication strategies in accounting and auditing environmental. What strategies are used in the accounting environment?

My profession is accounting and auditing. While carrying out auditing for one of my clients, I came across a transaction in the financial statements with serious misstatements. The misstatements in the financial statements arose from either embezzlement through collusion, financial fraud, or intentional asset misappropriations. Upon inquiry from the relevant authority, the management refused to cooperate. Instead, they branded me as incompetent and unable to handle and undertake any professional work and they requested my company to remove me from the position. I had to explain myself and convince the management of the client of the misstatements and the impact they had on the financial accounts (Louwers, T.J., Ponemon, L.A., Radtke, R.R 1997).

The situation I was in was the situation of being kicked out from the assignment because of the purported incompetence. I had to employ a number of strategies that are known in professional circles to overcome the problem of incompetence as mentioned by my perpetrators.

To begin with, I had to explain my professional integrity and ethics as applied. I did not want to do what the management of my client was asking to do, that is to assume the materiality of the misstatements and collude with them in concealing the act. I had to explain to them about principles of a professional auditor which I was using. I explained about the integrity of the auditor, the objectivity of the audit, the competence of the auditor, the fairness in the audit, the confidentiality in the audit report, the professionalism in carrying out the duty, and due diligence in decision making regarding transactions.

These few statements made the management not believe. They reacted by kicking me out as an incompetent auditor who ought to see the door. They wrote a letter to the management requesting them to replace me with a competent auditor who is ready to follow instructions. Unfortunately, I had to defend myself before my organization and before my client’s board.

Strategies

In getting out of the situation, I prepared the statement relating to the work I was carrying out detailing my findings, the impact of the misstatements, and the possible source of the problem. In my letter to the management, I detailed that the discrepancy in the books of account may have arisen from forgery, financial statement fraud, due to asset misappropriations, document falsification for purposes of embezzling some assets within the company. I detailed in my letter that auditing standards and professions that an auditor to carry out auditing under some principles (Likierman, A.,1989).

The principles I mentioned in my letter stated that:

1. in carrying out my audit, I was required to maintain independence from other professionals, the management, or any other person in order to ensure that there was no compromise to my professional ability to make the right decision and opinion.
2. I told the committee that I ought to maintain integrity since it is a requirement for an auditor to be a man of great integrity who does not associate himself with professional misconduct. I stated that an auditor should be a man of unquestionable character in relation to finances.
3. I stated that in my audit and in my opinion I am required by the audit standards and regulators to exercise due diligence, thoroughness, and independence in my work. In the letter, I explained that it is my responsibility as an auditor to ensure that I have used all reasonable means to cover all issues relating to my audit and all my work must be supported with information, possibly primary information (Louwers, T.J., Ponemon, L.A., Radtke, R.R 1997). In the case of secondary information, it should be highlighted.
4. I told the management in my letter that professionalism is paramount in exercising auditing. Meaning that all my work and opinion needed to be based on a reasonable and adequate basis which is based on the information provided by the management of the company. I told them that information from third parties was not sufficient and failure by the management to provide information for the audit was actually against the good business practice. I told them that professionalism is normally gauged on how an auditor communicates with his audit and other financial users.
5. I explained to them that I needed to maintain independence in my audit without interference from the management or from my boss in which I highlighted the importance of independence and objectivity of the audit. I dispelled the insignificance of interest of the directors and other members of the firm.
6. in explaining my work, I made them understand that my decision or opinion about the financial position of the company will be fair and it should be a fair view from all interested stakeholders (Louwers, T.J., Ponemon, L.A., Radtke, R.R,1997). Therefore, their decision of trying to influence the materiality of the transaction in question was irrelevant.
7. I told them about the confidentiality of their financial statement and promised that I will not disclose the financial information obtained during my audit since that will be a breach of trust bestowed upon an auditor as a responsibility (Louwers, T.J., Ponemon, L.A., Radtke, R.R (1997).

Upon the management receiving my letter and going through it, they realized how serious their interference with my work was. In their response, the management apologized and requested me to use third-party information relating to a transaction of cash that disappeared from the office. The third-party information that I was requested to use was the director’s appointed friend who had carried out investigations relating to transactions. However, the investigation was a mere cover-up. I requested further information from the primary source which was supplied although the management was not supporting my incentives of recovering the funds (Margulles N. and Wallace J, 1973);.

The rule is when communicating information relating to financial statements discrepancies, the auditor prepares a management report to the company management highlighting all the findings and weaknesses which the management ought to act upon before the next audit period. He is also required to communicate to the world about the financial statements through his opinion which will be published in the financial statements of the company. He will appendix his signature to the financial statement opinion which is the auditor’s communication to the world and the world will rely on this communication in making any decision in finance about the company (Keyton J; 2004);.

The auditor is requiring illustrating with reports in a manner that is understandable by the general public. He should be able to communicate changes that he has made in his report relating to the situations he encountered while auditing the firm. It will be a fundamental mistake for the auditor not to express the situations he encountered if they were not properly done (Macan T.H., 1994).

References

Keyton J; (2004); Communication and Organizational Culture; Sage Pub.

Likierman, A. (1989). Ethical dilemmas for accountants; a United Kingdom perspective. Journal of Business Ethics 8:617-629.

Louwers, T.J., Ponemon, L.A., Radtke, R.R (1997). Examining accountants’ ethical behavior: a review and implications for future research. In V. Arnold & S.G. Sutton (Eds.), behavioral Accounting Research (pp 188-221). Florida: the American Accounting Association.

Macan T.H., (1994); “Time Management: Test of a process Model.” Journal of Applied psychology.

Margulles N. and Wallace J, (1973); Organizational Change techniques and Applications (Glenview, IL: Scott, Foresman O’Rourke J.S, Management Communication- A case analysis approach.

Pfeffer J, (1992) Managing with power: politics and influence in organization Boston: Harvard business School press.

Robbins S, (2004); Organizational Behavior 10th edition, Pearson education.

Shim J; (1999); Operations Management; Barron’s Educational Series.