Audit reporting procedures - Lecture 10

Question 1

What are the five claims to the public interest?

Answer 1

1. As regulators
2. Grant of royal charter
3. Professional bodies
4. Public interest rhetoric
5. Focus

Question 2

How to regulators provide social standing and privileges to the public interest?

Answer 2

.They legitimise the profession and aura of independence
.Protector and regulator

Question 3

What does a royal charter require before it is granted?

Answer 3

When a number of criteria are satisfied including the incorporation of the public interest

Question 4

How to professional bodies claim public interest?

Answer 4

.Professional by the government
.Professional by self-regulation
.Use the public interest as a reminder of their responsibilities

Question 5

How does public interest rhetoric claim public interest?

Answer 5

.Increased legal responsibilities
.Increased pressure on auditors from public concerns over audit failure
.Increased public criticisms
.Increased visibility

Question 6

How does focus claim public interest?

Answer 6

.Quality of reported accounting information
.More accountable

Question 7

What factors affect the auditors reporting responsibilities?

Answer 7

1. Control of audit quality
2. Paradox in corporate reporting
3. Economic dependence created by large clients
4. Auditor-client negotiation capacities
5. Auditor opinion shopping and the audit committee

Question 8

How does control of audit quality affect reporting responsibilities?

Answer 8

.Lack of control of audit quality
.Failure of recognising or disclosing the underlying accounting problems
.Abilities of auditors and their perceptions of their abilities

Question 9

How does economic dependency affect audit responsibilities?

Answer 9

.Cost of litigation and reputation
.Proxy for independence and audit quality

Question 10

How do auditor-client negotiation capacities affect auditor responsibilities?

Answer 10

.Difference due to differences in the professional responsibilities of auditors and clients

Question 11

What is audit shopping?

Answer 11

The practice of seeking an auditor willing to support a proposed accounting treatment that helps a company achieve its reporting objectives even though doing so will impair reliable reporting

Question 12

How does audit shopping affect audit responsibilities?

Answer 12

.Linked to a lack of auditor independence and client advocacy
.Harm shareholders because of excessive monitoring costs associated with a change in auditors