ACC614 Week 2 Discussion 2 Social Media and the Role of the Auditor

• How are financial statement auditors suited to take on this proposed new role?

Publicly traded corporations must disclose their financial accounts to the general public. Since social media sites are open to the public, what evidence do users have to check that the underlying algorithms are accurate and doing their jobs? “After all, digital media firms are wholly reliant on these algorithms, and as a result, the achievements or shortcomings of these algorithms define the achievements or shortcomings of the social media company in which investors have placed their money. They need to have a wider insight into such measures, since it makes perfect sense “(Leetaru, 2021, para. 14). When someone does not have evidence or facts to back up their claims that what they’re doing is successful, anybody may assert that what they’re doing is successful. All figures are put out again on social networks, and the algorithms they use are hypothetical since there are no facts to back them up. “It is odd that although their financials need to be independently validated, the programs that drive such financials don’t need to go through the same degree of attention” (Leetaru, 2021, para. 11).

• What might additional knowledge, expertise, or skillsets need from the auditors to effectively complete the task?

Even though an algorithm is nothing more than a collection of steps followed to do a specific job, the auditors will need extra information technology knowledge, experience, or skill sets to understand how the algorithm works. The social networking website is currently under construction. The explanation for this is that whenever they review the financial facts, they find that When facts are examined, they may either be proven true or untrue. “In the end, insisting on frequent public transparency about algorithmic correctness Metrics and routine external audits would be of great use to the general public and those responsible for formulating policies. And so that their very own investors have a clearer understanding of what the actual situation is behind the scenes " (Leetaru, 2021, para. 16).

• How might auditors alter their engagement planning and fraud risk assessment procedures if they were tasked with this responsibility?

Due to algorithm secrecy, the fraud risk estimate won’t alter. If the finances are in order, just word-of-mouth is accessible. “Social platforms may self-audit and identity their progress. Each failure is shrugged off as a learning opportunity, no matter how much damage it did, and every assertion about accuracy is imprecise. Even national genocide assisted by their platforms is rejected as a chance to improve “(Leetaru, 2021, p. Taking on a customer with misleading claims that will be discovered in an audit is risky. “Given the harm fraud may do to financial markets, auditors are obligated by standards to examine fraud risk in every audit. Less convincing audit evidence is needed when fraud risk is minimal. When fraud risk indicators are recognized, the auditor needs more convincing audit evidence. Once fraud risk indicators are recognized, the auditor should create and implement procedures that directly address fraud risks “Louwers et al. (2021, p.125)

References

Leetaru, K. (2019, July 21). Do we need new laws forcing the external auditing of social media algorithms?. Forbes. Retrieved from https://www.forbes.com

Louwers, T. J., Bagley, P. L., Blay, A. D., Strawser, J. R., & Thibodeau, J. C. (2021). Auditing & assurance services