Question

What are some expectations from auditors when entities face economic difficulties? Support your answer with some examples.

Answer 1

Following are the expectations from auditors when entities face economic difficulties;

Auditor's assurance and attestation on financial statement Increases credibility of true and fair view of economic users of it.

Auditor through their findings about material items may Indicate financial irregularities and fraud suspects .

Auditor through their acquired skills and professional judgement indicate adherence of compliance standards.

Auditors are expected to follow their quality standards by which authenticity of financial users are enhanced

Auditor are expected to indicate their observation and report about basic accounting assumptions and solvency position of financial statement.

Auditor are expected to discover matters which are of exceptional nature like devising Information tools and computer assisted audit techniques.

Auditor are expected to ensure whether Financial statements are prepared in Required Financial reporting framework and whether they follow Accounting Standards.

Auditors are expected to provide Their opinion on financial statements whether qualified, adverse,or disclaimer of opinion.

Auditors are expected to be heard at company's general meeting and require to attend audit committee meeting or such others as required by law.

Auditors are expected to raise voice as whistle blower in some conditions.

Some examples are

Suppose there exist a Fraud then there is specific requirement of it's in reporting mechanism . Auditor would have to report to appropriate Authorities in due time and care, to avoid further financial implications to curb financial difficulties

When firms goes in financial difficulties It get due deligence and investigation for internal financial restructurings at that time Auditor is required to consider all facts ,in circumstances so as to indicate causes for remedial measurements.In recent example SEC has filed claimed in case of GE in which KPMG was alleged for  rejecting accountancy measures against hedging and later fined for such matter. Same is in the case of Bernard Madoff where also KPMG kept silence in Financial Fraud . However Auditors are expected to play their role In taking Accounting measure, taking care in valuation of assets, in reviewing financial decisions and drafting and reporting Audit report through proper disclosures as expected by them in financial difficulties faced by the enterprises and as a whole as a Watch Dog