the function of external auditing will be complex due to the recent economic crisis ? are you agree or disagree
Dear Dr. Ali Al-obaidi,
Yes, it will be very complicated.
External auditing will definitely be more challenging, primarily due to uncertain economic environment and difficulties to forecast profitability of audited company.
Just for the example: deferred tax assets are recognized in a balance sheet only up to the amount of pre-tax income expected in foreseeable future; therefore, recognition and auditing of deferred tax assets will be more difficult as the pre-tax income in foreseeable future will be much more difficult to forecast.
Nearly similar situation happened after the global economic crisis in 2008.
I do not agree with those who believe that the recent economic crisis will affect the effectiveness of the external auditing, as the external audit has its foundations and principles in the audit work.
I dare to say that the short term it will negative impact the efficiency of the client service. However the long term effect could be suprising, as clients realize that the audit in majority could be done out the field. I suggest to look at the Big4 financials for the current year. We might be suprised.
ECONOMIC CRISIS or any kind of crisis does not change the objective and nature of the audit (internal or external). The condition under which the audit is conducted may be modified to fit the situation, i.,e. covid-19. The work condition may change under crisis, but the standard to which the audit must maintain---is the same.
The COVIC 19 crisis has its economic and social implications both in the short and long term , that will definitely affect the audit process done and consumed by social beings. The audit standards remain the same but the processes can't remain the same. On-the-job audits for instance wont have same process and yield the same result like outdoors audits done online due to COVIC19 constraints. Audit services risk not be adequately rendered /rewarded/motivated due to social , health and financial constraints directly or indirectly triggered by the COVIC19 crisis.
External audit will bring in new challenges of frequently changing government policies and shifting of goal post by the government tax and loan adjusting policies.
Nowadays, external auditor's scope and his role is highly challenging, because, most of top level management, officers in higher hierarchy positions are now almost aware of the completion in the audit and accountancy services, if external auditors gives crystal Clear independent report, will lead to scarify income from other financial services and consultancy services, which they provides to specific company or group of companies.
Of course, it will be difficult for all parties, including the Board of Directors and potential investors.
With the present scenario of Covid virus spread and imposed lockdown conditions, it is very difficult or almost impossible to carry external auditing by physical presence of committee members. But the same may be cleared using real time video conference and stock verification.
That's obvious for most of local auditing firm and small clients. However, the situation might not be complex for big four and other large auditing firms which moved to a digital audit before this pandemic. The question remains to client's infrastructures to support digital audit and this is not an issue for huge and internation companies.
Yes but the task of management is also more difficult. And government. And hospitals. Why do external auditors have it any more difficult than others?
The current crisis covid 19 ravaging the world would make auditing work more challenging
Yes. Thorough audit jobs may not be possible with this pandemic and economic melt down across the globe. However, this is an eye opener towards developing means of online/virtual audit exercise without compromising the ethics of the assignment.
Yes. External auditing will surely be affected. From what we have see so far during the heat of the pandemic where movement were restricted, we can see that to gather audit evidence at this period could be hampered. I believe most external auditor came up with contingency plan during the period of the pandemic.
Yes, the external audit agreement has become more complicated in light of the new crises facing the world. In one of the articles, it referred to the responsibility of the external auditor by saying:
For external auditors, an expectation gap often exists between what the general public expect from them in detecting and reporting fraud, and their actual responsibilities under standards. Under ISA 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, auditors are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. The International Auditing and Assurance Standards Board (IAASB) highlight in their COVID-19 staff alert, the need for auditors to have heightened awareness of the possibility of fraud or error, with the importance of the exercise of professional skepticism top of mind when performing audit procedures.
Professional accountants will need to be alert to the pressure exerted on them or by them on others. The IESBA’s International Code of Ethics for Professional Accountants, including International Independence Standards (the Code), which establishes the standard of behavior expected of a professional accountant, specifically addresses pressure on accountants that might lead to a breach of the five fundamental principles of the Code (integrity, objectivity, professional competence and due care, confidentiality, and professional behavior). The IESBA staff is also developing a publication to highlight aspects of the Code that might be relevant to accountants in navigating the current crisis, and identifies potential COVID-19 related pressures.
Yes , I agree It will be difficult to get the data required to complete the review process ...
Yes i agree that the function of external auditing will be complex due to the recent economic crisis. Auditing practices have been severally questioned. It will increase the level of criticism of auditing profession and increase the pressure on auditors to improve audit quality.
This Link Maybe Useful:
https://en.wikipedia.org/wiki/External_auditor
Due to social isolation it is not possible to be present in all situations, I believe that this can, in a way, make the work of the external audit team somewhat difficult.
Flavio Maldonado Bentes
Thank you too much for a contribution And answer
External audit is getting new challenges for all types of business and economic sectors but more on such where paper work is practising most and due to lockdown they are trying to continue their Business transaction with digital support. Digital ways of transaction have motive towards keep living their business but it have lack of proper technological infrastructure and experienced practice trends thus conducting audit function, auditor and their staff are facing new challenges of examination and verification of transaction. I agree with the statement that external auditors will face complexities due to this economic crisis specially on those nations where technological advancements are less and paper work are usal practice.
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