Auditing is a process involving the use of analytical skills and professional judgment as well as skepticism. As such, it is a very important part of the ever-growing field of accountability within organizations. Auditing is normally performed by trained and experienced professionals using the appropriate methodology and compliance with all relevant technical standards with an aim of expressing an opinion. In order to compose a quality audit, the auditor has to be professionally competent and comply with all relevant standards of auditing. The auditor should also be independence in the mind and appearance. Auditors’ should ensure that all due diligence is done by the audit engagement team and that all necessary working papers have been prepared before arriving at a reasonable quality conclusion.
Globalization of business has led to high demand for consistent and high-quality audits ( Roy & Saha, 2016 ). It directly affects both accounting and auditing since stakeholders in business environment expect compliance with international standards in accounting and auditing. This paper is aimed at d escribing and evaluating the article named’ Relationship of statutory auditors' competence and independence with audit quality’. It also sheds light on quantitative and qualitative techniques used in the research. It outlines conclusions and limitations of the research and how it supports professional ethical virtues. Finally, the paper addresses how the ethical theory selected can be applied in a firm.
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Auditor Competence and Independence
Competency is the actual demonstration of the ability to perform a task to the required standards ( Roy & Saha, 2016 ). Competence sometimes may be reviewed through methods such as workplace performance and simulation of written and oral self-assessment. Professional knowledge and attitudes are also required to demonstrate competence.
Competence demands that an auditor should be in a position to make sound judgments , not only in professional matters but also of people. He must possess auditing skill and experience and also have an imagination and ability to recognize apparent inconsistencies and abnormalities. The auditor is required to be independent in mind and appearance ( Roy & Saha, 2016 ). He should approach every assignment with objectivity.
Lack of independence compromises the quality of audit work since it makes the auditor be biased. Any conflict of interest that might arise to compromise an auditors’ objectivity or which seems to do so must be avoided. There are factors that threaten auditor’s independence. Include, is familiarity threat posed by the management and subordinates.
The second threat is a self-interest and self-review threat that occur as a result of undisclosed vested interests by the auditors. It is difficult to maintain auditors’ independence, implying that an auditor requires setting up mitigation measures to eliminate any possible threats.
Discussion of the Research Question in the Paper
The paper discusses the quality control procedure for statutory audit of financial statements ( Roy & Saha, 2016 ). Quality controls are procedures adopted by a firm aiming at providing reasonable assurance that all audits done by a firm are being carried out in accordance with ISQC. Ethical requirements such as independence must be upheld. Acceptance and continuance of client relationship should be regulated.
An auditor should be savvy when selecting personnel in the engagement team using a fit for purpose criteria ( Daugherty, Parker, & Peters, 2016 ). An auditor should monitor engagement performance, resolve any difference of opinion and review engagement control. He should deal with complaints and allegations made against him.
An auditor should not over-rely on one client as his sole source of income. Future auditing developments require there be service limitation, proposing that auditors should not be allowed to provide audit clients with non-auditing services. High-quality audit work helps an auditor achieve audit objectives effectively, efficiently and economically. An auditor is able to avoid disputes with clients and minimize the risk of professional negligence.
Quality control enables the auditor to provide professional service to clients and ensure regulatory visits proceed smoothly. Through quality control, auditors ensure staff is monitored and controlled to help identify training needs. Quality control finally creates an avenue for the auditor to ensure staff appraisal systems operate effectively and that he can provide assurance of the audit process to the stakeholder.
Methods of Research
The paper applied both quantitative and qualitative measures of research at arriving at an amicable solution. Sampling designs were used in the collection of data from respondents. The research also applied hypothesis testing and estimation in summarizing the opinions of the certified accountants and students.
Qualitative research measures applied included nonnumeric data aimed at collecting the opinions of individuals. Qualitative measures involved the use of interviews and administration of questionnaires. Quantitative measures of data were also applied, which are a measurement of data that can be presented in form of numbers and functions. Such methods included the Chi-Square Test of Homogeneity, Mann-Whitney test, and the Pearson's Correlation Coefficient and t-test. Quantitative measurement is aimed at running statistical analysis that data can be presented in the numerical state.
Conclusions of the Research
Through the research, it was realized that auditors hardly comply with all set regulations ( Roy & Saha, 2016 ). Competition amongst auditing professionals, create pressure on auditors to reduce audit fees and the engagement time compromising quality. The research held that quality control for statutory audit is inhibited by the auditor’s inability to ensure compliance with regulations.
The auditors are advised to periodically evaluate the outcome and implementing continuous learning program. The auditors are advised to enhance the effective peer review of auditing assignments. The research findings suggested that an independent body should monitor the appointment of various statutory auditors appointment, as a way of reducing management’s influence on appointment.
Limitations of the Research
Although the research tried to be as comprehensive as possible, it was limited in a certain way. The research was based on assumptions. It assumed that in analyzing the similarity of opinion is laniary correlated which may not be the case at all times. The research also assumed that there exists a direct relationship between the selected variables and satisfactory quality control for statutory audit. The research also relied on sampled data. A sample can only give rise to absolute conclusions but not relative information.
The Paper Support on Virtue Ethical Theories
The paper did support the normative ethical position that judges the morality of actions. It emphasizes not only on the inherent goodness or the consequences of the auditor's actions but also based on the action’s adherence to rules and obligations. The paper outlines the necessity of auditor’s ethical values. It emphasizes the importance of the auditor avoiding conflict of interest, bias and avoiding management influence.
The paper holds that from a consequentialist standpoint, a morally upright action is one that produces a good outcome, or consequence. In this view, the paper states that independence and competence of the auditor are of great influence on the quality of the audit work.
Application of the Ethical Theory Selected
The theory can be applied in identifying the weaknesses in the auditing process and the vulnerabilities an auditing department may face. The theory can be applied to improve the competence of the auditor. An auditor should regulate the relationship between him and the audit client by avoiding any circumstance that might seem to threaten his independence. He must also avoid any action that might put the audit profession in disrepute.
The auditor should avoid overlying on the same client for auditing fees. An auditing review committee should be formulated to spearhead nomination of auditors, set up the scope of audit work and review the performance of the auditor. The auditor should engage a continuous learning program to keep the engagement team updated and he should periodically review outcome.
References
Abbott, L. J., Daugherty, B., Parker, S., & Peters, G. F. (2016). Internal audit quality and financial reporting quality: The joint importance of independence and competence. Journal of Accounting Research , 54 (1), 3-40.
Halim, A., & Sutrisno & Achsin, M. (2014). Effect of Competence and Auditor Independence on Audit Quality with Audit Time Budget and Professional Commitment as a Moderation Variable. Journal of Business and Management Invention , 3 , 64-74.
Roy, M. N., & Saha, S. S. (2016). Relationship of Statutory Auditors' Competence and Independence with Audit Quality. Vilakshan: The XIMB Journal of Management , 13 (1). 61-80.
Wealleans, D. (2017). The quality audit for ISO 9001: 2000: a practical guide . Gower.
