The expanding role of the auditor
Question 1 Topic 1
The expanding role of the auditor
Fraud detection appears to be taking on increasing importance within the auditing profession, and forensic auditing (accounting) is becoming a significant and specialised area of accounting. However, the question is: how involved should financial auditors be in fraud detection? There are calls for financial auditors to return to focusing on fraud detection (DiGabriele, 2011). However, others argue that financial auditors do not have the time to effectively audit for fraud and that specialised forensic auditors should be part of the financial audit (Asar, Wright & Zimbelman, 2015).
Assume you are a senior auditor of Wills and Williams Audit Services Pty Ltd. and your audit partner has asked for a briefing on providing specialised forensic accounting and auditing services. Also, the partner is considering integrating a forensic auditing role into the audits of the firm’s larger ASX listed clients. Prepare a briefing report that covers the following:
- A comparison of forensic and financial auditing, including the areas other than fraud covered by forensic auditors (accountants). (15 marks)
- The advantages and disadvantages of employing forensic auditors in financial audits or providing a forensic investigation for fraud as a separate standalone service. (15 marks)
- A recommendation on the approach the audit firm should take. (5 marks).
Question 2 Topic 2 Auditor independence and ethics
Kerry is a senior auditor and a member of the team auditing a long-standing client, Rankin Industries Ltd. The estranged uncle of Kerry’s wife, Ava, died recently and she has just received a letter from the executor of her uncle’s estate advising her that as the only surviving relative she will receive his entire estate. Included in the estate is a large parcel of shares in Rankin Industries Ltd., in addition to cash and other property. Kerry and Ava did not know her uncle had made her the sole beneficiary of his estate or that he was a significant shareholder in Rankin Industries Ltd. Ava is worried because she knows that Kerry must abide by strict rules laid down by his audit firm about holding shares in client companies. However, Kerry believes they should hang onto the shares as he is aware, from his preliminary audit work, that Rankin Industries Ltd is about to announce a merger and the value of the shares will increase significantly.
Ava approached a mutual friend, Andrew who works with Kerry, for guidance as she is concerned Kerry will be dismissed because of this. While Andrew can provide appropriate advice for Ava, this has created an ethical dilemma for him. Andrew has come to you, as a fellow accountant who has no personal connection with the couple or his accounting firm, for advice.
- Use the American Accounting Association ethical decision model to decide the course of action you would recommend to Andrew. (30 marks)
- Prepare an email to Andrew with your recommendation and attach the documentation from (a). (5 marks)
In addition to the marks for question 1 and 2, up to 20 marks will be given for Professional presentation and communication, including adherence to the presentation requirements (see below), and referencing in accordance in with the CSU Guide to APA referencing as set out in the marking guidelines.
This assessment task will assess the following learning outcome/s:
- be able to explain the role of assurance services and providers.
- be able to identify and evaluate the influences on the audit processes, including the Corporations Act, Common Law, Australian and International professional standards, professional bodies and public expectations within a global market.
- be able to appraise the expanding scope of auditing in the current international business environment.
Marking criteria and standards
Explanation and appraisal of the expanded role of auditors in the forensic accounting area
(LO1, LO2, LO5)
|A succinct explanation and|
Forensic accounting and the range of forensic accounting activities comprehensively explained. The discussion on the advantages and disadvantages of options to incorporate forensic accounting into the audit firm demonstrates an insightful understanding of the expanding role of the auditor. Research is evidenced by the inclusion of four (4) or more appropriate references.
|Forensic accounting and the range of forensic accounting activities clearly and succinctly explained. The discussion on the advantages and disadvantages of options to incorporate forensic accounting into the audit firm demonstrates a clear understanding of the expanding role of the auditor. Research is evidenced by the inclusion of three (3) references.||Forensic accounting and the range of forensic accounting activities clearly explained.|
Demonstrates an understanding of the expanding role of the auditor in the area of forensic accounting, that can be incorporated into the accounting firm. Research limited, only one (1) or two (2) references provided.
|Forensic accounting and the range of forensic accounting activities correctly identified. However, limited detail included in the explanation.|
Discussion on the advantages and disadvantages of options to incorporate forensic accounting into the audit firm demonstrates a basic understanding of the expanding role of the auditor. Research limited, only one (1) or two (2) references provided.
Identification and evaluation of the ethical influences on the audit process (LO2)
|Provides a comprehensive synthesis and critical evaluation of the auditor independence issue. Provides a comprehensive synthesis and critical evaluation of the auditor’s ethical issue in the scenario, using the AAA model.||Provides an advanced synthesis and critical evaluation of the auditor independence issue. Provides an advanced synthesis and critical evaluation of the ethical issues for the auditor in the scenario using the AAA model.||Provides a competent synthesis and critical evaluation of the auditor independence issue.|
Provides a competent synthesis and critical evaluation of the ethical issues in the scenario, using the AAA model
|Provides a basic evaluation of the auditor independence issue. Provides a basic evaluation of the ethical issues in the scenario. Some aspects of the AAA model overlooked or not well utilised|
|Professional presentation (as per requirements set out in the presentation section) and communication. Referencing in accordance with CSU Guide to APA Referencing. |
|All presentation requirements met. Excellent written expression with very clear articulation of ideas and concepts. Superior grammar and spelling skills. References presented show evidence of significant research and are used accurately in accordance with APA (6th ed.) requirements.||All presentation requirements met. Consistently clear and concise expression of ideas. No spelling errors and only minor grammatical errors. References presented show evidence of significant research and are used accurately in accordance with APA (6th ed.) requirements.||All presentation requirements met. Expression of concepts is clear and concise. Very few spelling and/or grammatical errors. References presented show evidence of reading outside the subject resources and are used accurately in accordance with APA (6th ed.) requirements.||All key presentation requirements are met, however a couple of the other presentation requirements overlooked. Some inconsistency in sentence structure. Clarity of expression could be enhanced by some revision. Some spelling errors and/or poor grammar. At least three (3) references included and mostly used in accordance with APA (6th ed.) requirements.|
Your assignment will be marked out of 90 which will then be converted to a mark out of 15.
The following points are key requirements for presenting assessment items, and must be followed or your assignment marks for professional communications and presentation will be reduced.
- Assessment item is to be prepared using Word. If the assessment is lodged as PDF you will be asked to resubmit in Word.
- Appropriate format is used (briefing or email)
- Suitable briefing format is used for question 1.
- Use a standard 12pt font such as Times New Roman, Calibri or Arial.
- Use 1.5 spacing between lines, this makes for easier marking.
- Use appropriate margins at the left and right of your work, and double enter between paragraphs, as markers need space to be able to include their comments.
- Left-justify body text.
In addition this assessment is to be presented in the following format and using respective word features:
- Separate cover page with your name, student number, subject code, assessment number and number of assessment questions.
- Each question must start on a new page, however there is no need for the individual requirements of each question to start on a new page.
- The header level function in word is to be used for question headings and sub-headings, this is necessary for preparation of a contents page.
- A contents page, using the autofunction of “table of contents” tool is to be included. This tool is located in the reference tab of word.
- All pages, except the cover page, are to be numbered, with name and student number included in a header or footer on each page.
- Always use your spelling and grammar checker, but remember that this does not pick up all errors. You must still manually and carefully edit your work.
- Always keep a copy of your assessments. Both a hard copy and an electronic copy.