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Problems With Relying on Work of Auditors in Other Countries Proposal

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Updated: May 10th, 2022

Introduction

External auditors present audit reports to companies and governments whilst following the laws on the financial statements of the organization. They ought to be members of well known accountancy agencies. External auditors are appointed by the organization to carry out the audit. Most countries rely on audits from other countries. Organizations could carry out their own audits but it seems like most prefer external audits. Both choices have their pros and cons. The advantages may outweigh the disadvantages but through this project, we will get to know which one is worth the risk (Neely and Cook 79).

Justification

These are generally the issues with defects in financial reporting and have been for a very long time. Every year the organization has to do through similar questions when considering the external audit for the Board (Summers, Sweeney and Wolk 1). To have a competent CFO with CPA certification is always a plus for most organizations but the CAO would be treading on dangerous grounds to be without the training. There is a challenge for many multinationals to direct and control their overseas operations that leads to a platform that renders them an opportunity to carry out uniform financial reporting. To have a successful auditing process, the firm (customer) has to ensure a complete involvement with every aspect of the audit including the ability to present the necessary documentation as to and when needed (Summers, Sweeney and Wolk 1).

Literature Review

When financial reporting errors are detected especially in multibillion dollar companies that may expose the stakeholders to unprecedented magnitude of loss, the general public are at loss on what may have gone wrong in spite of presence of a plethora of organizations that purport to take their interest at heart. However, there may be several reasons for the perceived negligence. First, there may be a lack of knowledge of the industry, a lack of technical knowledge in matters relating to the industry, a terrible attitude, where they wouldn’t listen but always acted as if they knew best, significant turnover, poor managers who failed to guide and supervise staff or review work papers properly. “Furthermore, there may be an inability to direct and control the actions of affiliates overseas, resulting in poor coordination and substandard work or worse still, a reticence to call the tough shots” (Brody and Frank 216). These challenges leave a gap which can easily result in organizations, making mistakes that if not detected by the external examiners may end up a source of fraud (Brody and Frank 216). The literature review section will handle the scholarly work in chapter two where it will scrutinize documents and already published literature, which relates to this study. This entails past literatures from those scholars who worked on external auditing and their problems. This study will also encompass the importance of literatures that encouraged relying on works of auditors from other countries. This research is one of a kind as it is a maiden research in the country. Most researchers dwell on the importance of auditing neglecting the few problems that may have impact on the economy (Zhang, Pawlicki, McQuilken and Titera 199).

Research Questions

The following research questions form the focus of this study:

  1. Were the directors content with the fact that the external work of auditors was of high quality?
  2. Have the directors received the required knowledge and understanding of the “business and industry; the organization’s performance and financial condition; and the related accounting and reporting”? (Zhang, Pawlicki, McQuilken and Titera 200).
  3. “Were the directors able to apply that knowledge; did they ask appropriate questions to get clear answers “of the integrity of the filings with the regulators?” (Savage and Callaghan 112).

Methodology

This is a sensitive question that requires total discretion and brutal honesty among the key organizations and players. The study will involve random sampling of 20 organizations as listed on the stock market but from five major sectors of the economy. Each sector shall produce 4 key organizations. From these organizations atleast three persons, from finance, audit and the board shall be interviewed. Pretested questionnaires shall also be prepared and used where time constraints disqualifies interviews (Brody and Frank 215).

Data Analysis

The data will be organized and analyzed to give the answers to the question of the problems of relying on auditors from other countries. The comparison will be further drawn to indicate the nature of the said organizations. Data analysis tools for social research such as SPSS shall be utilized (Savage and Callaghan 111).

Conclusions

From the literature so far reviewed, it is evident that the latest trend by many organizations to carry out external audits, which to a certain extent, brings down the economy any employment rates of qualified public accountants. The objectives stated above shall come to pass if this study is successful and well read. Despite the limitations, the research ought to be carried out. Both the primary and secondary methods of data collection shall be of value to the study. A research like this one has never been carried out. Auditors and firms are hence ignorant on problems that face them. With this approach the results of this study will strengthen the communication among all the parties concerned (Hermanson, Hill and Ivancevich 39).

References

Brody, Richard, and Kimberly Frank. “The Future of the Certified Internal Auditor and the Internal Auditing Profession.” Journal of Education for Business 75.4 (2000): 215-219. Print.

Hermanson, Dana, Callahan Hill and Daniel Ivancevich. “Information Technology-Related Activities of Internal Auditors.” Journal of Information Systems 14.1 (2000): 39-54. Print.

Neely, Pamela, and Jack Cook. “Fifteen Years of Data and Information Quality Literature: Developing a Research Agenda for Accounting.” Journal of Information Systems 25.1 (2011):79-108. Print.

Savage, Arline, and Joseph Callaghan. “Peacock, Eileen Accounting for the Development Costs of Internal-Use Software.” Journal of Information Systems 18.1 (2004): 111-126. Print.

Summers, Scott, John Sweeney and Carel Wolk. “Problem-Solving Style and Fit in Consulting and Auditing.” Journal of Information Systems 14.1(2000):1-15. Print.

Zhang, Li, Amy Pawlicki, Dorothy McQuilken and William Titera. “The AICPA Assurance Services Executive Committee Emerging Assurance Technologies Task Force: The Audit Data Standards (ADS) Initiative.” Journal of Information Systems 26. 1 (2012): 199-205. Print.

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IvyPanda. "Problems With Relying on Work of Auditors in Other Countries." May 10, 2022. https://ivypanda.com/essays/problems-with-relying-on-work-of-auditors-in-other-countries/.

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IvyPanda. 2022. "Problems With Relying on Work of Auditors in Other Countries." May 10, 2022. https://ivypanda.com/essays/problems-with-relying-on-work-of-auditors-in-other-countries/.

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IvyPanda. (2022) 'Problems With Relying on Work of Auditors in Other Countries'. 10 May.

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