Question

Mr. Amado Bunkers, CPA, Chief Accountant of Bunky Bunkers, Inc. and younger brother of President Bunkers argues that he is a CPA, that the accounting system and procedures of Bunkers are impeccable, and as such, there is no need and it will be a waste of money for an independent audit of the company. Do you agree with Mr. Bunkers? Explain in detail why you agree or disagree with Mr. Bunkers.

Answer 1

No I will not agree with Mr. Bunkers point of view in independent audit of a company

The independence and autonomy of CPA firms was called into question recently after financial irregularities at Enron Corporation became public - and the corporation was forced to file for bankruptcy protection. However, the U.S. economy still needs independent auditors. CPAs play a vital role by ensuring that most financial statements do not contain significant irregularities.

If all the facts concerning financial transactions were properly recorded by the company, and if the owners or managers of businesses were knowledgeable and completely trustworthy, there would be little need for independent auditors. But since most business owners are not trained as accountants, and those that are rarely keep up with all of the latest accounting rule changes, and since a few are dishonest there will always be a need for independent auditors.

We must recognize that in some cases the goals of the customer [the provider of information] do not match the goals of the users of the information. For example, a company trying to get a loan or a line of credit may try to make its financial statements look as strong as possible - and this is where the need for independent auditors becomes obvious - to turn fantasy into reality.

The goal of having audited financial statements independently certified is to try to ensure the financial information provided is an accurate, complete, and unbiased representation of the financial condition of the company under review.

Reliable financial information is essential to the following groups:

And Also the below reasons are also explains the need for independent audit

• Credit professionals making decisions about credit granting,

• Investors or potential investors considering whether to invest in the stocks or bonds issued by corporation

• Bankers considering whether or not to sign off on a loan request

• Government compliance. An external auditor can help identify areas where your books or accounting practices are no longer in compliance with new Internal Revenue Service regulations. An external audit can also pinpoint where your compliance efforts may be lacking. Since an external auditor has no reason to be anything but honest about the status of your financial compliance, you can rely on the independence of the investigation and on the recommendations being made.
• Credibility. Internally and externally, your financial statements will carry more weight if they’ve been vetted by an external auditor. For family businesses, closely held corporations and non-profits, these audits provide common ground for stakeholders to properly assess the financial health of the organization. For publicly traded companies, external audits offer an unbiased glimpse into the accounting practices of the organization.
• Fraud Prevention. While it may be unpleasant to even think that someone could be defrauding your company, it’s better to know for sure than continually wonder. It’s impossible to spot a fraudster just by looking, and they often turn out to be the person least likely to arouse suspicion. External auditors examine bookkeeping records without the filter of personal relationships clouding their judgment. For them, the financial statements will tell the unvarnished truth, and their impartial inspection could keep your business from taking a major loss.
• Process Improvement. Hopefully, your external audit will turn up nothing unusual. Even in this instance, however, an outside accountant might find areas where you could improve your internal controls or automate certain processes to be more streamlined. While these recommendations don’t have to be implemented immediately, knowing where waste and inefficiency are originating will allow you to put a plan in place to address the problems over time.

So Independent audit of company is required for the company and the view of Mr. Buckers is incorrect in this case