AUDITING & ACCOUNTING ETHICS

Running head__Auditing Accounting Ethics _Auditing Accounting Ethics Auditing Accounting Ethics Question 1

In The Great Wall Street Scandal ' his book on equity funding (Enron of the 70s ) Raymond Dirks wrote : If routine auditing procedures cannot detect 64 ,000 phoney insurance policies 25m in counterfeit bonds , and 200m missing assets , what is the purpose of audits ' We 're still there . Until audit procedures trace through the client 's own records rather than accepting predictable assurances from management , they will fail to demonstrate any meaningful purpose

Required : Evaluate the purpose of an

audit , linking your answer to the commentary above

The Committee on Basic Auditing Concepts of the American Accounting Association defines auditing as

.a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users (Ricchiute , 2001 ,

. 11

In the above definition , the purpose of an audit is to ascertain the degree of correspondence between assertions and criteria and the subsequent communication of results ' Here , the issue of materiality and risk are of extreme importance as guiding principles in the audit function considering that the uncertainties leading to an audit failure are determined entirely by the extent by which material deviations from accounting treatments are made in terms of recording , presentation and disclosure . An auditor is expected to ascertain whether there was compliance with relevant standards such as the General Accepted Accounting Principles (GAAP , the International...