Free Custom «Why Do Good Accountants Do Bad Audits» Essay Paper

Good accountants may not carry out an audit that meets the expectations of other stakeholders of a firm. Accountants may not carry out an audit successfully without facing the challenge of biasness that may result in distorted information. An audit should be carried out in a transparent manner when all the necessary measures in the auditing profession are well observed. Provision of subjective information at the end of an audit may give misleading information to various groups of people that rely on this information. Such groups are mostly the investors, management, regulators, among others. Thus, there is a great need of auditing information to reveal the current operation of the company and to avoid being subjective in nature since this information is relied upon by numerous individuals.

Firms sometimes opt for accountants to carry out the audit. These accountants may be good at their profession but can carry out bad audits, influencing a firm’s records. The major problem that leads to their inefficiency and unreliability in carrying audits is not corruption, but unconscious biasness that they mostly practice. This biasness arise from three accounting aspects that act as opportunities of influencing judgment when auditing, thus leading to biased and subjective auditing report. One of these aspects is the fact that the accounting profession does not rely on ambiguity in the interpretation of information while auditing profession does. Thus, accountants may not be professional in auditing as they may interpret a firm’s information in different ways. Another aspect that may influence biasness of accountants in auditing is the attachment that they may have with their clients. The accountants may present incorrect information for their clients so that they can not be fired. They may use audits to create relationships with their clients and sell their consulting services, thus leading to incorrect and unreliable auditing information. Familiarity of the client may also be an opportunity for carrying out a biased audit since the client and the accountant are acquainted to each other that influences the level of subjectivity of the  audit report.

 

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Question 2: Prohibition of auditors from providing consultant and tax services to clients

Accountants have pointed out radical remedies in an attempt to reduce this biasness in the carrying out of an audit. One of such radical remedies is the prohibition of auditors to carry out both consultant and tax services to clients. This remedy is effective in reducing biasness in the auditing profession. Auditors relieve the pressure of acting as sales people of other services that their firm may provide in reduction of biasness. It influences the existence of a conflict of interest that auditors may face in the carrying out of an audit. This conflict of interest arises in the situations whereby the accountants who advise the client on boosting its profits do act as the auditor of this same client. This remedy will thus help eliminate aspects of the accounting profession that may lead to biasness once accountants are appointed as auditors by the same client.

Question 3: Prohibition of the firing of auditors

The second way to reduce biasness in the auditing profession is to prohibit the firing of auditors. Once auditors present an objective report that is unfavorable, they may be fired by the client. In most cases it happens because such auditor has given an independent and true report on the records of the firm. Such revelation may lead to the auditor being fired in most cases. The prohibiting of the cases of auditor’s firing may thus work towards the decrease of any form of biasness in the auditors report. This method will also involve the provision of limited contract periods during which the provision of services to a client cannot be terminated. This will lead to the elimination of the auditor’s fear of being fired once their report proves to be unfavorable to the management. Stating and agreeing upon the fees and terms of the contract at the beginning of it and ensuring they are not changed will also enable the auditors to work independently without fear, thus reducing any opportunity of biasness in the carrying out of the audit. This will also be useful for the auditors in the reduction of cases of criminal liability, since they will not be forced to place reliance on the representations that may be made by the client’s management in the course of carrying out an audit.

Question 4: Prohibiting clients from hiring auditors who hire them

The last way to reduce the cases of biasness in the carrying out of an audit is the prohibition of audit clients to hire individual accountants separately and without awareness of their audit firms. This method is effective in reduction of biasness, since it eliminates the cases of auditors trying to please their clients by giving a favorable and subjective report. Barring an auditor from seeking a position in the firm for at least five years will also ensure that auditors are not biased in carrying out the audit. Imposing rotation of clients by accounting firms as part of the remedy towards reduction of biasness will also be effective. Ensuring this, the audit client is prohibited from hiring the audit client at the end of the contract period. The auditors will thus be in a position of giving an unbiased report on the financial records of the firm. This is because the client is not in a position to hire them back as it is prohibited.

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Though accountants may be good at the provision of accounting services, they may be poor in conducting of an audit and thus the need of putting in place these three remedies that will work towards the elimination of biasness in conducting an audit.