Ethics in Business
Ethics in Business
The purpose of auditing of financial statements of an organization is to shed transparency into the financial activities of the organization and to show that the representation of the figures presented in the books of accounts is both true and fair. An auditor thus reviews all the financial statements of a company, and in order to carry out a comprehensive audit, the audited firm needs to provide all the relevant information required of them.
In a scenario where the provision of information is delayed whether deliberately or non-deliberately, the auditor is within his rights to discuss these issues with those charged with governance. Snyder explains that, those charged with governance include those persons and/or organizations responsible for the overseeing of the strategic direction of the company in question. This is in addition to other obligations related to the accountability of the entity, including financial reporting or otherwise (6). The auditors responsibilities to those charged with governance includes the responsibility to the expression of opinions concerning the financial statements prepared by management under the oversight of those charged with governance, relating to whether the auditor’s opinion is that they conform to the applicable financial reporting framework or not (aicpa.org 1563).
The auditors have an obligation to maintain information flow between the relevant authorities during the audit period. Time is always an important factor during this exercise and as such, the auditors should give timely reports to their employers (aicpa.org 1562).
In view of the above, if an issue is to arise, the auditor should communicate verbally to those charged with governance. In addition, if those charged with governance are also involved in the management of the entity, the auditor is still required to communicate with them on a timely basis (aicpa.org 1563). However, a conflict of interest might arise if the results of the audit undermine the good of the firm. For instance, if the results of an audit implicate a major client of a firm and the firm’s wellbeing depends largely to the business provided by this client, the auditor might find himself in a conflict of interest. In the event of conflict of interest, the auditor should evaluate the relevant interests among the two relationships and the significance of the threats posed by the performance of the professional service (AICPA 9). If the threats are not minimized or eliminated by the safeguards, the auditor should decline to continue with the professional service that would result in a conflict of interest (AICPA 9).
AICPA. Conflict of Interest. August 13-14, 2013. Web. October 3 2013.
Aicpa.Org. The auditor’s communication with those charged with governance. December 15, 2012. Web.October, 3 2013.
Snyder, Lisa. Proposed definition of those charged with governance. September 10, 2013.Web. October 3 2013.
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