Question

What role does Internal control, Ethical responsibilities of accountants, Ethical responsibilities of independent auditors, Professional roles, Audits of high-risk accounts, Professional issues, and International issues have in the audit profession?

Answer 1

Internal control in the organisation decides the extent of substantive testing in auditing. A strong internal control will mean less transactions to be checked and vice versa.

Ethical responsibilities of accountants clearly laid down and enforced by Chief Financial Officer reduces the risk in Accounts department and increases reliance on internal controls in Accounts department. Substantive testing will be less in auditing and will mainly be limited to check the ethical responsibilities of accountants.

Ethical responsibilities of independent auditors clearly laid down and implemented helps the audit profession in relying on the work of independent auditors in developing an audit strategy for the company. It also saves time in audit profession where double efforts are not involved in the same work at the same time without visible risk.  

Professional roles including clear job description, KRAs, SOPs etc. ensure that the work to be done by each department and each personnel within the department is clear and known to all. It facilitates in test of control and substantive testing of the audit profession.

Audits of high risk accounts like bad debts write-off, penalties levied by customer, significantly high current expense accounts compared to last year etc. reveal areas for concentration by the audit profession in devising audit plan and in selecting the frequency of audits.

Professional issues like companies going under Insolvency Code where auditors are questioned about their roles during audit helps strengthen audit profession and keeps the audit profession on their toes. Also professional journals, seminars, trainings, certifications help the audit profession being educated about new ways of doing profession.

International issues like Sarbanes Oxley Act increase the work and recognition for audit profession. Also in a small world where lot of investments, fund flow happens across borders, all happenings internationally like crude prices, exchange rates, commodity prices, etc. have a bearing on audit profession's recommendations.