What is it about?
Whilst the benefits and potentials of the dual roles assumed by external auditors are emphasized, as well as the need to ensure that safeguards operating to guard against a compromise of objectivity and independence are in place, this paper also highlights the fact that even though such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
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Why is it important?
Even though such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
Perspectives
This publication is important from the perspective of the need to safeguard the audit independence and objectivity whilst also appreciating the benefits (attributed to auditors) of having worked with a firm for a certain period to acquire knowledge about that company, industry, sector - as well as specialized expertise which would be lost (so called related economies of scale) if mandatory rotation requirements were overly imposed in the form of shorter periods during which a firm is expected to exercise mandatory rotation rules. Cost benefit analyses may have to be applied in certain circumstances - however this should not preclude the ultimate goal of safeguarding the independence required to enable the audit work to be undertaken effectively.
Prof Marianne Ojo
Northwestern University
Read the Original
This page is a summary of: Sarbanes Oxley, Non Audit Services and the Mandatory Rotation of Audit Firms, SSRN Electronic Journal, January 2013, Elsevier,
DOI: 10.2139/ssrn.2365008.
You can read the full text:
Resources
Sarbanes Oxley, Non Audit Services (NAS) and the mandatory rotation of audit firms
Whilst the benefits and potentials of the dual roles assumed by external auditors are emphasized, as well as the need to ensure that safeguards operating to guard against a compromise of objectivity and independence are in place, this paper also highlights the fact that even though such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
Critical Audit Matters: The New Auditing Reporting Model
“A critical audit matter is defined as a matter that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment.” In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.
New Auditing Reporting Model: The Final Standard ('AS 3101')
To what extent are critical audit matters, as well as matters relating to subjectivity and judgment likely to impact the future of financial reporting – particularly the need to exercise adequate judgment, reasoning, supervision and other vital mechanisms of corporate governance? This is already impacting the field of Data and Audit analytics. Effective mechanisms of accountability and disclosures procedures – coupled with all important verification and authorization procedures constitute part of essential components which will be required to address challenges presented in this new era.
The Neighbor Principle, Principal Agent and Stakeholder Theories: Proposed Model to Address Challenges of Digital and Audit Analytics
In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.
Critical Audit Matters: The New Auditing Reporting Model
Critical Audit Matters: The New Auditing Reporting Model “A critical audit matter is defined as a matter that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment.” In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.
New Auditing Reporting Model: The Final Standard ('AS 3101')
To what extent are critical audit matters, as well as matters relating to subjectivity and judgment likely to impact the future of financial reporting – particularly the need to exercise adequate judgment, reasoning, supervision and other vital mechanisms of corporate governance? This is already impacting the field of Data and Audit analytics. Effective mechanisms of accountability and disclosures procedures – coupled with all important verification and authorization procedures constitute part of essential components which will be required to address challenges presented in this new era.
The Neighbor Principle, Principal Agent and Stakeholder Theories: Proposed Model to Address Challenges of Digital and Audit Analytics
In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.
Sarbanes Oxley, Non Audit Services (NAS) and the mandatory rotation of audit firms
Whilst the benefits and potentials of the dual roles assumed by external auditors are emphasized, as well as the need to ensure that safeguards operating to guard against a compromise of objectivity and independence are in place, this paper also highlights the fact that even though such dual roles are appropriate in certain cases – as illustrated by justifications for limitations imposed by the Sarbanes Oxley Act and other relevant and applicable legislation – instances also persist where section 201 of Sarbanes-Oxley, with regard to internal audit outsourcing, may have been over-reactionary and may continue to hinder both companies and their auditors.
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