Company Financial Reporting Is Key To Theefficient

Background to the Project: Company financial reporting is key to theefficient and effective operation of capitalmarkets. A critical element is the quality of theaudit, and auditor independence is one of a number of important blocks on which that quality is built. In addition, ethical behaviour plays a vital role in ensuringpublic trust in financial reporting and business practices and upholding the reputation ofthe accountancy profession. With relevance to this, and over recent years, discussions about the operationof the audit market have focused on audit tenure, i. e. the longevity of audit firm relationships with the companies they audit. Thesediscussions have included a debate about the relative merits of mandatory audit firm rotation and a requirement to tenderthe audit engagement on a periodic basis. On one hand, as the independent regulatorresponsible for promoting high quality corporate governance and reporting in the UK, the Financial Reporting Council (FRC) seeks to promote high standards in audit. If that objective is to be achieved, the FRC believes that a company should be able to retain the firm that it believes is best able to undertake its audit. The FRC therefore believes that tendering, not mandatory audit firm rotation, is the appropriate way forward. Tendering provides1an effective way by which companies can examine whether they have the best auditor available, yet does not preclude the reappointment of the incumbent auditor if that firm is demonstrably the best able to undertake the audit. Tendering also has the potential to stimulate innovation in the way audits are conducted as audit firms seek ways to demonstrate the merits of their audit tender. Notably, in October 2012 the FRC introduced a new provision requiring listed companies to put their audit out to tender every ten years. On the other hand, making it mandatory for audit firms to rotate is one of the measures other regulators around the world are looking with the intention of improving the independence, objectivity and professional skepticism of professional auditors. For instance, listed companies in the U. S. are required to rotate engagement partners every five years, but there is no requirement in the U. S. to rotate audit firms. A concern is long-term relationships with audit firms may create problems with objectivity or independence (even though the audit partner is rotated every five years). As expected, the Big 4 audit firms and other large accounting firms came out against an audit firm rotation requirement. For instance, Ernst & Young believes that mandatory rotation would come at a great expense to audit quality. Nonetheless, in some parts of the world, for instance Qatar, listed companies are required to rotate the entire audit firm every five years. Thus, and given the debate above, much research has been carried out to outline why it may be believed that mandatory audit firm rotation will put audit quality at significant unnecessary risk and undermine the reliability of financial reporting for any company. Thus, many argue that there are more effective ways to reinforce auditor independence, objectivity and professionalism. REQUIREMENTS: Discuss the above debate and evaluate the suggestions provided for and against mandatory audit firm rotation in reducing threats to auditor independence. In your report, you should be able to: 1. From an ethical point of view, comprehensively d e s c r i b e a n d e x p l a in t h e d e b a t e(ordilemma) a b o v eand its implications2for auditors’ independence and the impact on the credibility and reliability of financial reporting. 2. Determine the various stakeholderswho may be affected by the debate (or dilemma) above. 3. Suggest/offer courses of actions or effective waysto reinforce auditor independence, objectivity and professionalism together with a comprehensive analysis of the several impacts on the various parties involved. 4. Suggest and select the most appropriate course of actionand provide valid conclusions to your discussion. INSTRUCTIONS: The answers provided for the points raised above MUST be in the form of an INDIVIDUALLY written report. Word count is set at 1 800 words(excluding front page and list of references). The report will count for 20%of the final course mark. FORMAT OF REPORT (MUST ADHERE TO): >The report should be structured as follows: SA title page (showing the project’s title as above, student’s name, student’s IDSAn appropriate“Introduction” relevant to the title of the project. •SSection headings and if appropriate sub-sections. These are to be considered as your main body. Sections should be ina logical order showing cohesiveness and good writing skills. •SAn appropriate “Conclusion”at the end to conclude the discussion. SList of references. Remember that referencing is required both in body text and at the end in the list of references. SPages to be numbered. SUse TIMES NEW ROMAN as the font, size 12, and lines are to be 1. 5 spaced NOT SINGLE SPACED, also ADJUST

Order Now