Question

Write a memo by answering following questions.

Overview:

Identify a current topic impacting financial statements or audits to analyze and communicate in writing.

Your analysis will be graded on the following:

Ability to identify a topic/event that is relevant to financial statements and/or auditing today.

• Consider looking at websites like the FASB (recently issued tab), PCAOB, IAASB, ASB, Big 4 Firms, AICPA, Accountingtoday.com, etc. to identify a topic.
• Professional journals, see page 53 in your textbook, these publications are available through the campus library.  

Analysis of the issue/event.         

• What’s going on?
• What’s the issue?
• Are there two sides, if so, consider the pros and cons of each.
• What are your thoughts on the issue?
• Are there any relevant timelines?

Written summary of your analysis.

• Maximum of 3 pages
• Business memo format: Purpose, Analysis, Conclusion (these sections must be included at a minimum, use headers and sub-headers to organize your paper)
• No spelling/grammatical errors
• Clearly and concisely communicate the materials

Answer 1

Ability to identify a topic/event that is relevant to financial statements and/or auditing today.

For example, new technological tools have the potential to enable the auditor to mine and analyze large volumes of structured and unstructured data related to a company's financial information.

This capability may allow auditors to test 100 percent of a company's transactions instead of only a sample of the population.

The major accounting firms have asserted that the use of these tools will enhance the audit by automating time-consuming tasks which are more manual and rote in nature.

For example, through the use of artificial intelligence, robotic systems could interface with a client's systems to transfer and compile data automatically, something previously done manually by a junior auditor.

Other areas where such technologies may introduce efficiencies include processing of confirmation responses or using drones for physical inventory observations.[6]

As a result, the auditor should have more time to carefully examine the more complex and higher risk areas that require increased auditor judgment and contain high levels of estimation uncertainty.

Such tools, we are told, will also enable auditors to perform advanced analytics which will provide them with greater awareness and deeper insights into the company's operations.

Data analytics may also allow auditors to better track and analyze their client's trends and risks against industry or geographical datasets, allowing them to make more informed decisions and assessments throughout the audit process.

Further, firms assert that through the power of big data, auditors will be able to correlate disparate data information to develop predictive indicators to better identify areas of higher risk

, which in turn could lead to early identification of fraud and operational risks. For example, firms we are told have the ability to develop predictive models to forecast

financial distress in order to better assess the future financial viability of a company or improve fraud detection by helping auditors assess the risk of fraud as part of their risk assessment.