The Impairment of Public Oversight and the Failure to Function in Auditor Behavior in Saudi Arabia Case Solution & Answer

The Impairment of Public Oversight and the Failure to Function in Auditor Behavior in Saudi Arabia Case Solution 

Auditors have to conduct audit with the questioning mind, susceptibility and with independence, perceived and actual. The term perceived and actual independence can be elaborated as the perceived independence is the auditor’s perceptual independence in the mind of the third party that is shareholders or stakeholders. The actual independence is in conflict with the perceived independence (Uchenna N. Akpom, n.d). Usually it is argued that the auditor’s independence is affected by the provision of non-audit services to the same client (ADEYEMI, 2012).The non-audit services include those services which are not of assurance nature, such as management advisory services, tax compliance and advisory, payroll management and other business consultancy services.

It is argued that the non-audit services provided to the client create threat to independence for the auditor(INTEGRITY, OBJECTIVIT, 2011). The threat to independence includes threats such as Self-interest threat, Self-review threat, Advocacy threat, Familiarity threat and Intimidation threat. The major threats that will contribute to the independency of the auditor in an adverse manner are the familiarity and self-review threat. These threats if present must be eliminated, self-review threat will also affect the objectivity and deter the professional conduct in the audit, this threat is define as where the auditor finds himself in a situation where he is auditing and evaluating his own work. Such that he has already performed non-audit service for the client, as the tax advisory and consultancy, which is also part of the subject matter of the audit. Therefore, he will be less objective in the critical evaluation of the work already being performed by him. Familiarity threat will result in loss of independence and objectivity, as the auditor would become too familiar with the management of the client and thus, will become reluctant to take objective decision against the client. Self-interest threat will occur where the auditor would become dependent on the fees from the client and etc.All the threats could be faced in certain situations and auditor must protect his/her objectivity and independence from impairing(Reviewing auditor independence, 2003).

The latest corporate scandals that have been emerged indicate the lack of professional behavior of the auditors and their diminished independence and objectivity. This also shows the incompetency of the SOCPA in regulating and monitoring the practice and profession. The major corporate scandal, Mobily scandal is the main contributor in this theory of incompetency. The company had recorded excess sales that as per accounting rules should have not been recognized. The auditors, without any effort, should have identified such incompliance with the accounting framework but it was alleged that the auditor were also involve in this scandal(Watfa, 2015). The auditing firm and the auditors are bound by the state not to engage in any audit work since then. Therefore, it is evident that the auditors might face adverse consequences if they don’t observe their fundamental attributes, independence, integrity and objectivity in performing audits. Here the oversight board becomes active and takes the necessary decisions so that the public trust remains intact on the advisory board and the profession.

There are some major perceptual issues that originate in the mind of the investors, who then contribute these to the professional behavior and integrity of the auditor. The auditor is perceived to have acted in a specific way such as to detect fraud, as per perception, which is actually not required from him. Therefore, there are some behavioral issues that are only perceptual in nature.

There had been some major corporate scandals occurred that placed questions on the auditing and accounting practice as well…………..

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