ACC618 Week 5 Discussion 1 Ethical Concerns of Auditor

The purpose of an audit is to provide some level of assurance that no major misstatements have been made in the financial statements. By defining what is and is not material to the financial statements, materiality helps ensure that only relevant information is included. An auditor’s job is to check that a company’s financial statements are free of any major misstatements by organizing and carrying out an audit in a way that provides reasonable confidence of that.

Whether due to human mistake or deliberate manipulation and the audit committee is informed without delay of any discrepancies that may have been discovered. Here are some of the mistakes, crimes, and scams that are mentioned in our text: Mistakes: “An error may arise from accidental misstatements or omissions of numbers or disclosures in the financial statements.”

Financial statement fraud “relates to intentional conduct that causes a misrepresentation of the financial statements,” Acts That Contravene the Law: “violations of laws or governmental rules” (Mintz and Morris, 2014, p.250).

In light of the foregoing, an auditor must always act with impartiality, objectivity, and skepticism to check for and report any major misstatements in the financial statements. To sum up, an auditor’s discovery of an error or fraud that has a material impact on the financial statements and causes them to misrepresent the company’s financial position, operating results, or cash flows constitutes a serious misrepresentation. According to Exhibit 5.1 of our text, auditors are required to disclose their findings differently depending on whether or not the information is considered relevant (below). Financial statements will be directly affected by any misstatements reported, and fines/penalties and even closure may result if the mistakes were motivated by fraud.

A qualified judgment on the validity and honesty of financial accounts can only be rendered by an auditor who has exercised the requisite independence, objectivity, and skepticism throughout the audit process.

References

Mintz, S. M., & Morris, R. E. (2014). Ethical obligations and decision making in accounting: Text and cases (3rd ed.). Retrieved from https://www.vitalsource.com