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Meaning of Auditor

Discuss about the Business Modeling for Research Directions.

Auditors are significant for the companies in order to increase the effectiveness of company financial books of accounts. Therefore, this report frames with the aim to identify the role of business profession i.e. auditor in business and industry. This report is also provided with the views of different authors regarding the role of effective auditor profession in a business organization. Further, this report analyzes the different requirements and constitutes professionalism while involving in any profession. Moreover, this report emphasises the various practitioners’ material for analyzing the significance of a profession.

An auditor is a person who verifies the company financial statements and accounts and it is appointed by the auditor company. The auditor also provides the different ways to the company in the context of cost reduction and enhances the financial revenues. There are four types of auditors such as external, internal auditor, public, and forensic auditors (Guedhami, et al., 2014).  For this, internal auditor is appointed by the company for the effectiveness of internal financial controls.  Similarly, the external auditor is hired by the organization regarding professional services. On the other hand, audit enables the firm to increase the accuracy of company accounts as well as company feasibility. Forensic auditor’s comes under the state, federal, and local government. For this, they ensure the revenue is spent and received as per the government laws and regulation (Francis, et al., 2013). Similarly, a public auditor facilitates to investigate the bankruptcies, financial crimes, and securities frauds.

 Boritz, et al. (2014) identifies that the auditor role is significant in business organization and an industry, because in a business the auditor ensures that the taxes and duties are paid by the company on the regular basis of time. Along with this, it also evaluates the financial operations of the companies for analyzing the company run successfully.  Moreover, in business, auditor is also assisted the organization in terms of effective business strategy, advice to mitigate the business threats, governance, and internal control process. Another important role of auditor in business i.e. it provides the approval of company annual budget and stakeholders accounting.  For this aspect, auditor has also aware the business regarding monetary policy.

Apart from this, an auditor is also playing the important role in industry, because it improves the accuracy of company books of accounts. For example, an auditor is quite helpful to enhance the market share and of the telecommunication industry, which is positive impacts on the company shareholders. Because of this, if the financial performance and accuracy of the telecommunication are strong in the industry so that investors can spend more money in telecommunications stocks.  As a result, it may considerable impacts on the industry revenue.  Besides this, an auditor is legally liable to access the financial statements of any organization in the industry (MINUTTI?MEZA, 2013). This can be done for checking the data reliability and accuracy.  

Role of Auditor in Business and Industry

In consequence, it can be said that the auditor profession has significant impacts on the business and industry, because it enables the company and industry to improve their profitability and feasibility

Gul, et al. (2013) observed that the auditing is significant to provide the public interest for strengthening the trust, accountability, and accuracy in financial reports. Moreover, development of industries may tend to create the more opportunities for the auditors. Meanwhile Brown-Liburd, et al., (2015) observed that the auditor helps the company top level management in terms of improving the financial accuracy in order to maintain the internal control from regulatory compliance. It also facilitates to recover the consequential losses from insurance companies. In oppose of this Guedhami, et al., (2014) auditing process is a very costly and time-consuming process, which may increase the cost of the company. Thereby, it has significant impacts on the company profitability.

However, new accounting standard and regulatory standards may hamper the profession of auditor, because of lack of knowledge and skills in terms of new standards thereby; it may generate the legal issue in the organization. In contrast to this Brown-Liburd, et al., (2015) new standard helps to aware the auditor about new deviation in the report.

Nagy, (2014) the auditor is also playing the significant role in the capital market, because it removes the errors and misstatements in the financial statements, which enables the company to raise the capital from market. Hence, it helps to raise the market capitalization of the company.

Further, Guedhami, et al., (2014) identifies that different countries have required different skills, knowledge, and auditing standard for doing effective practices at the global level. As per The Association of International Accountant, an auditor should graduate from A graduate school. Further, if a person wants to become the statutory auditor, he will need to get a certificate from AIA Recognized Professional Qualification. Consequently, auditors should meet out the above criteria so as to start further auditing practices at the global level.

Skills and knowledge are essential towards any profession in the market. Thus, there are different requirements of skills and knowledge in respect of auditor profession such it is essential for the auditor to take the membership of a professional accounting body in order to practice its professional services in an organization. As per the Australian law, an auditor requires the skills assessment form from VETASSESS. Further, it requires different needs such as good communication skills, problem identifiers in company statements, and effective ethical framework (Caveião, et al., 2015). Similarly, auditor profession is also required a post-graduate degree from respective fields, work experience, proper training, and independence and confidentiality. On the other hand, the auditor requires the approved IIA’S certification staff documents. For this, it needs approx 3-4 year’s post graduate degree from recognised university. Auditor will require different things, which is likely to be discussed as below:

Academic Literature on Auditors Profession

The auditor must qualify as a professional accountant from recognized university/board. Similarly, auditor should keep the additional knowledge regarding the skills, ethics, attitude, and professional values (González-Díaz, et al., 2015). Nevertheless, auditors need to keep the knowledge of three areas for his auditor profession such as financial accounting, reporting, and audit. For this, working experience is mandatory for an auditor while working in the organization.

On the other hand, when hiring the auditor by company, it should analyze the peer review of the auditor for effective practices, which shows the laws and standards are being followed by the auditor. Further, the company can take the evidence of audit quality while finalising the auditor so that it can raise the company effectiveness.  Simultaneously, auditor should pass the minimum age criteria i.e. 18 for the auditor profession. Meanwhile Howieson, et al., (2014) while an auditor joins the organization, it is important to presents the confidentially proof of business reports in front of organizations. In addition, an auditor should have the large capability to improve the audit process and accuracy of books of account, which can be effective for the company.

Knechel and Salterio, (2016) assist that the auditor should abide the code of ethics in an organization while analyzing the financial statements of the company. Further, it requires submitting the proof of identification in organization. In opposing of this, Soh and Martinov-Bennie, (2015), a person is not eligible when he is an employee of an association, business partner, employer, employee of a committee member, and secretary of management committee.  As a result, above all requirements are essential for the auditor while joining this profession in a business organization or industry. These can be quite helpful to understand the requirements of the company. 

There are different things are to be required in order to remain the profession, because sustainable profession helps to improve the personal growth of the people and it also helps to create the positive image of the auditor in the market. Thus, an auditor will be required different things to remain the profession in future such as an auditor should aware every time regarding the new auditing standards and laws so that it can easily implement in an organization while practising the audit profession (Hurtt, et al., 2013). This new standard will quite helpful to reduce the frauds and any misstatement in the company books of accounts. Further, auditor is required to polish its skills through new changes in the auditing standards, which may help to find out the errors in the reports. Moreover, an auditor complies the rules and regulation of auditing while providing their services in any organization. Thereby, there is a less chance of remaining errors and mistakes in the financial statements. Apart from this Andon, et al. (2015) suggested that the auditor should continue its audit practices in the organization, which can be helpful to become the good auditor in the market as well as it helps to remain the profession.

Requirement to Join Profession

As a consequence, above all requirements, are significant for the auditor in order to remain in the auditing profession. Hence, auditor should abide these requirements so as to find out new deviations.

Auditor professionalism helps to overcome the conflicts between the auditor and management, which impacts on the audit effectiveness. Whereas, the main aim of the code of ethics is to develop the ethical culture in auditor profession. Thus, there are different constitutes professionalism, which shows the auditor profession such as integrity, it means an auditor should be honest, straightforward, and trustful while practising (Triyuwono, 2015). Concurrently, auditor should away from the personal gains by using the confidentiality information. This shows the how an auditor works in a consistent manner. However, auditor should neglect the intentional opportunity in order to mislead and manipulate financial information. As per integrity section, 110 indicates that the auditor should not involve in reports, returns, and communication where he thinks that the false or misleading information. Similarly, objectivity and independence constitute are significant in the auditing profession, which depicts that the auditor should away from bias or undue influence, and by others forming the judgment (Knechel and Salterio, 2016). Through objectivity ethics, an auditor should disclose all facts of auditing to the organization employer. In this aspect, section 120 states that the auditor should not compromise with his profession during the audit services. Professional competence and due care constitute indicates that the auditor should keep maintaining the knowledge and skills in order to provide effective competent professional services (Gaynor, et al., 2015). This comes under the professional competence and due care section 130. Concerning this, auditor should follow the technical and professional standards while providing the professionalism services in the organization or client. Generally, GAAP principles are often required by the auditors during the auditor services, because it enables the auditor to provide the accurate accounting information. For this, an auditor should also follow the IIA’S international audit standard in order to practice the internal audit. Confidentiality constitute shows the auditor should not disclose the company financial information to other without any constant. Concurrently, auditor should not use the confidential information for personal advantage. Consequently, using information for personal use is against the audit laws and regulation (Shafer, et al., 2016). In the same way, professional behavior constitutes demonstrates that the auditor obliged to follow the appropriate laws and regulation. Meanwhile, it should keep away from any action that harms its profession (Douglas?Jones, 2015). Concerning this, as per section 150 of professional behavior shows that the auditor should be honest and truthful while marketing and promoting its work. By using these constitute, auditors objective is to work high standard of professionalism. This high standard safeguards are quite effective to identifying the unethical behavior in the organization (Ma’Ayan and Carmeli, 2016).  Though, auditing standards are also helpful to remain the auditor profession viability.

Apart from this, competency constitutes shows that the auditor should engage in all those activities where he has necessary skills, experience, and knowledge. From time to time, this constitutes indicates that the auditor should enhance its proficiency, effectiveness, and quality services. For this, the auditor should follow the principles of international Standards for the Professional Practice of Internal Auditing (Standards) in order to perform the internal audit practice effectively. In spite of this, as per the ACCA rulebook, an auditor should cover the various areas of practice such as whistleblowing, marketing professional services, laundering, and professional appointments (Shaub and Braun, 2014). Furthermore, a professional auditor should identify the business threats to compliance by using the fundamental principles. In the same way, auditor should also consider the qualitative and quantitative factor while identifying the threats in the financial statement, because it can increase the consistency of company accounts. In addition, in terms of conflict resolution, an auditor should consider the resolution process, which involves the relevant fact, ethical issues, and internal procedures, fundamental principles, and alternative course of action.   

On the other hand, effective knowledge, skills, and experience are also indicated the auditor professionalism.  Further, to obtain the certificate regarding the internal auditor from the certified internal auditor (CIA) is also indicates the auditor professionalism (Heyrani, et al., 2016). Apart from this, if an auditor provides the tax advice and opinion to the organization employer, its liability to record tax advice in the letter or memorandum files for future references. Moreover, auditor is obliged to check whether the employer pays the tax or not on the basis of information provided. As per section 30, an auditor should not provide the wrong information to the employer, which helps to increase the auditor level of expertise.

As a result, it can be said that the audit code of ethics is necessary for the auditor profession while practising its services in the organization. This can be helpful to maintain the risk management, governance, and control in the firm (Knechel and Salterio, 2016). Along with this, it helps the auditor to continue to seek its professional growth and opportunities in the auditor profession. 

There are various professional bodies and website that are supporting the auditor profession such as website of Queensland government, The institute of Internal Auditors (IIA), The International Auditing and Assurance Standard Board (IAASB), Association of International Accountant (AIA), International Federation of Accountants (IFAC), and Association of Charted Certified Accountants (ACCA). These practitioners’ materials are quite helpful to maintain the auditing profession and financial statements in the business and industry (Brennan and Kirwan, 2015). Simultaneously, these bodies have potential to provide the training, education, and technical resources to the auditor. Moreover, it is also helpful in forensic auditing, system auditing, and taxation filed.

An organization is important to hire the auditor for analyzing the accuracy in financial statements. As a result, on the basis of above analysis, it can be recommended that the organization should not consider the cost while selecting the auditor. Although, the cost is significant for the firm while taking any business related decision. For this aspect, the good auditor is quite effective for the firm, because it reduces the risk and errors in the company financial statements. Concurrently, it provides cost reduction methods consequently, it increase the firm feasibility (Gul, et al., 2013). Further, it recommends that the auditor should upgrade his skills by using new accounting and auditing standards so that it provides the error free company statements, which is relatively helpful to sustain the auditor profession for the long term. Moreover, an auditor should abide the laws and regulation of auditing during auditing practices.

Conclusion

From the above analysis, it can be summarized that the auditors are significant for the business organizations and industry. Because of this, it enables to improve the industry market share and accuracy of business financial statements.   It has been identified that the new auditing standard may hamper the auditor profession. Further, identifies that the auditor requires effective skills, knowledge, and experience, and updates with auditing standards are important for the auditor. Further, different constitutes professionalism supports the audit profession like integrity, objectivity, professional competence.

References

Andon, P., Free, C. and O'Dwyer, B. (2015). Annexing new audit spaces: challenges and adaptations. Accounting, Auditing & Accountability Journal, 28(8), 1400-1430.

Boritz, J. E., Carnaghan, C. and Alencar, P. S. (2014). Business modeling to improve auditor risk assessment: An investigation of alternative representations. Journal of Information Systems, 28(2), 231-256.

Brennan, N. M. and Kirwan, C. E. (2015). Audit committees: practices, practitioners and praxis of governance. Accounting, Auditing & Accountability Journal, 28(4), 466-493.

Brown-Liburd, H., Issa, H. and Lombardi, D. (2015). Behavioral implications of Big Data's impact on audit judgment and decision making and future research directions. Accounting Horizons, 29(2), 451-468.

Brown-Liburd, H., Issa, H. and Lombardi, D. (2015). Behavioral implications of Big Data's impact on audit judgment and decision making and future research directions. Accounting Horizons, 29(2), 451-468.

Caveião, C., Montezeli, J. H., Peres, A. M., Hey, A. P., Sales, W. B. and Costa, T. D. (2015). Skills required from the auditor nurse for his professional practice: an integrative review. Journal of Nursing UFPE on line, 9(10), 9584-9592.

Douglas?Jones, R. (2015). A ‘good’ethical review: audit and professionalism in research ethics. Social Anthropology, 23(1), 53-67.

Francis, J. R., Pinnuck, M. L. and Watanabe, O. (2013). Auditor style and financial statement comparability. The Accounting Review, 89(2), 605-633.

Gaynor, G. B., Janvrin, D. J., Pittman, M. K., Pevzner, M. B. and White, L. F. (2015). Comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on IESBA Consultation Paper: Improving the Structure of the Code of Ethics for Professional Accountants: Participating Committee Members. Current Issues in Auditing, 9(1), C12-C17.

González-Díaz, B., García-Fernández, R. and López-Díaz, A. (2015). Auditor tenure and audit quality in Spanish state-owned foundations. Revista de Contabilidad, 18(2), 115-126.

Guedhami, O., Pittman, J. A. and Saffar, W. (2014). Auditor choice in politically connected firms. Journal of Accounting Research, 52(1), 107-162.

Guedhami, O., Pittman, J. A. and Saffar, W. (2014). Auditor choice in politically connected firms. Journal of Accounting Research, 52(1), 107-162.

Gul, F. A., Wu, D. and Yang, Z. (2013). Do individual auditors affect audit quality? Evidence from archival data. The Accounting Review, 88(6), 1993-2023.

Heyrani, F., Banimahd, B. and Roudposhti, F. R. (2016). Investigation of the Effect of Auditors’ Professionalism Levels on their Judgment to Resolve the Conflict between Auditor and Management. Procedia Economics and Finance, 36, 177-188.

Howieson, B., Hancock, P., Segal, N., Kavanagh, M., Tempone, I. and Kent, J. (2014). Who should teach what? Australian perceptions of the roles of universities and practice in the education of professional accountants. Journal of Accounting Education, 32(3), 259-275.

Hurtt, R. K., Brown-Liburd, H., Earley, C. E. and Krishnamoorthy, G. (2013). Research on auditor professional skepticism: Literature synthesis and opportunities for future research. Auditing: A Journal of Practice & Theory, 32(sp1), 45-97.

Knechel, W. R. and Salterio, S. E. (2016). Auditing: assurance and risk. UK: Routledge.

Knechel, W. R. and Salterio, S. E. (2016). Auditing: assurance and risk. Routledge.

Ma’Ayan, Y. and Carmeli, A. (2016). Internal Audits as a Source of Ethical Behavior, Efficiency, and Effectiveness in Work Units. Journal of Business Ethics, 137(2), 347-363.

MINUTTI?MEZA, M. I. G. U. E. L. (2013). Does auditor industry specialization improve audit quality?. Journal of Accounting Research, 51(4), 779-817.

Murphy, D. S. and Yetmar, S. (2015). Student Perceptions of Auditor Responses to Evidence of Suspicious Activities: An Experimental Assessment. International Journal of Business and Social Research, 5(11), 48-59.

Nagy, A. L. (2014). PCAOB quality control inspection reports and auditor reputation. Auditing: A Journal of Practice & Theory, 33(3), 87-104.

Shafer, W. E., Simmons, R. S. and Yip, R. W. (2016). Social responsibility, professional commitment and tax fraud. Accounting, Auditing & Accountability Journal, 29(1), 111-134.

Shaub, M. K. and Braun, R. L. (2014). Call of duty: A framework for auditors’ ethical decisions. In Accounting for the Public Interest (pp. 3-25). Springer Netherlands.

Soh, D. S. and Martinov-Bennie, N. (2015). Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting. Managerial Auditing Journal, 30(1), 80-111.

Triyuwono, I. (2015). Awakening the conscience inside: the spirituality of code of ethics for professional accountants. Procedia-Social and Behavioral Sciences, 172, 254-261.

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