D3 What benefits can management derive from a company having an integrated audit?
A clean opinion enhances management’s credibility with shareholders and others and provides access to the
stock exchanges. An audit is often required by creditors such as banks and lending institutions. An audit helps provide access to these
sources of capital at the best costs.
An audit enhances reliability of the company’s performance indicators; one may be required before performance-
based compensation and bonuses are awarded. Feedback from the auditor may help management improve operational and financial
D4 What is a shareholder usually a remote owner? Why does the fact that shareholders are remote owners cause them to
benefit from an audit?
Shareholders of public companies are not usually involved in the day to day running of the business and are therefore
considered remote from the business..
-an individual shareholder may not understand all of the complexities of the financial statement presentation,
-even if the shareholder is diligent and has the knowledge to read and understand the financial statements,
he or she is not close enough to the business to be aware of all of the company’s day to day activities,
-even if he or she could, the owner would not likely want to spend the time to evaluate whether each
transaction was properly recorded and disclosed in the financial statements.
Auditors can provide assurance regarding the effectiveness of ICFR and the appropriateness of the financial statements and produce a
report that all shareholders can use.
D5 What do the complex transactions that occur in many businesses today have to do with the value of an audit?
The audit can provide reasonable assurance that the complex transactions are properly reflected in the financial
statements prepared by management.
D6 How can a company benefit from an audit in terms of its operations and performance?
During an audit the auditor examines and tests the functioning of numerous company controls and processes
and in so doing is able to recommend measures whereby the company can improve efficiency, either in financial and accounting
activities or operations.
E1 Why is knowledge of auditing valuable to an accountant who is not working as an auditor?
Knowledge of the audit process is valuable to all accounting employees.
Understanding the audit process provides a perspective of what the auditors are doing and what they are trying
It may promote efficiency and effectiveness in providing the audit team with information needed for them to
complete audit procedures.
An accountant in a management position who understands auditing can better communicate with the auditor, not
only during the audit engagement, but also when presented with any audit findings.
The requirement for an ICFR audit often forces accounting and non-accounting employees at all levels of a
public company into an awareness of audit activities; more knowledge in advance is better.
Because of ICFR audits, employees in non-accounting roles may have to deal with ICFR documentation and
reporting. An employee with knowledge of auditing is a valuable asset to the company in supporting company policies, procedures and
documentation that contribute to effective ICFR. The internal non-audit accountant may be the one who designs controls, and explains
their importance to other employees.
E2 In terms of their impact on auditing standards and audits, what is the relationship of the SEC and the PCAOB? The SEC
and the AICPA? The SEC and FASB? Congress and the SEC? State governments and the AICPA?
SEC and the PCAOB
The SEC, following the enactment of the Sarbanes Oxley Act (SOX) structured the PCAOB to be responsible for setting
auditing standards and oversight of audits of public companies, and the audit firms that perform the audits. The SEC approves the
PCAOB standards before they go into effect.
The SEC and the AICPA