Auditing and Assurance Services and Ethics in Australia: An Integrated Approach

Citation

Botica Redmayne, N. (2011), "Auditing and Assurance Services and Ethics in Australia: An Integrated Approach", Journal of Accounting & Organizational Change, Vol. 7 No. 4, pp. 408-410. https://doi.org/10.1108/18325911111182330

The aftermath of the recent financial and economic crisis has renewed discussion on the importance of audit quality in high‐quality financial reporting (EC, 2010). Audit quality, however, is hard to define as it is a complex and multi‐faceted concept (IASSB, 2011). It appears that audit quality is subject to many influences, amongst those are auditor standards and attributes. Personal auditor attributes, such as knowledge, skill, experience, ethical values and mindset have their foundation in quality education. The latest, the eighth edition of the Auditing, Assurance Services and Ethics in Australia certainly provides a good platform for such education.

The eighth edition of this well‐known text is based on the 12th US edition of the “tried and true” Auditing and Assurance Services: An Integrated Approach (Arens et al., 2007). The eighth edition is focused on auditing in the Australian environment in terms of applicable standards issued by the Australian Auditing and Assurance Standards Board.

The book consists of 19 chapters, with the first five chapters setting the scene by discussing the demand for audit and assurance services, audit reports, auditors' legal environment (with emphasis on Australian legal environment), audit responsibilities and objective and most importantly audit quality and ethics. The material with emphasis on audit quality in conjunction with corporate governance, auditor competence, ethics, independence and audit performance expectation gap is new. It is a welcome addition providing an educational resource that contributes to the potential enhancement of auditor attributes, through auditor knowledge. Learning about the interaction between auditor competence, ethics and independence and performance expectation gap is likely to provide future auditors with better understanding of these important inputs into audit quality. There is a strong emphasis on ethics and auditor independence in this book which makes it different from its American source. Another topical and interesting feature of the eighth edition is Chapter 10 on fraud auditing. This chapter provides extended coverage of the auditor's responsibility for assessing the risk of fraud and detecting material misstatements due to fraud, including a reflection on good corporate governance as a means to reduce fraud risk.

Chapters 6 through 12 are “audit process” type chapters define of audit evidence, materiality and risk and cover the process of auditing from planning, through internal control and control risk assessments to developing the overall audit plan and programme. Chapter 11 addresses the impact of information technology on the audit process, from both an IT risk assessment point of view as well as from the auditor's use of a computer point of view. It is surprisingly that IT is dealt with separately, as opposed to being incorporated in most if not all of “audit process” chapters. However, the text does come with a CD that has ACL software and tutorials for students to learn about and then attempt to use audit software in an audit assignment.

An important feature of the textbook in these middle chapters is the integrated case – Pinnacle Manufacturing, which is included in the parts that follow the relevant syllabus. The case is comprehensive and well written and provides opportunities for students to practice the application of their knowledge and integrate material from a number of chapters. In addition, there are extracts from the annual report of a fictitious Hillsburg Hardware Company that provide some additional business context.

Chapters 13 through 17 are concerned with the detail on how to audit a number of transaction cycles, such as sales and receivables, acquisition, payments, payables, inventory and warehousing, payroll, personnel and cash, property, plant and equipment, capital acquisitions, etc. These chapters are very detailed and build on the framework outlined in earlier chapters. The effect of e‐commerce and how it affects various transactions is incorporated throughout these chapters, which is a good feature of the book. It would be fair to say that if earlier chapters are seen as a skeletal structure of an audit process, then Chapters 13 through 17 can be seen as a muscle to the overall audit process body of knowledge. Audit sampling is presented as a separate topic in Chapter 15. However, potentially the material could have been incorporated in the chapters dealing with the detail on auditing various transactions so to emphasise the fact that sampling is an integral part of audit evidence collection.

Chapter 18 presents material relating to the completion and finalisation of an audit, while Chapter 19 outlines other assurance engagements and other environments, from internal auditing and public sector auditing to assurance services on carbon emissions reporting. The material on carbon emissions reporting and related assurance is new and reflects contemporary Australian developments. This material, however, is equally and increasingly important for other settings due to the interest and relevance of carbon emissions reporting around the world. This last chapter might perhaps be better placed towards the front of the book, with a view of explaining earlier in the book the diversity of assurance services and various levels of assurance in the modern world.

The book includes other good features such as chapter opening vignettes that introduce concepts, “real‐life” examples, “auditing in news” boxes throughout the text with recent cases, and items of interest from the press and media. Each chapter also has internet‐based cases which provide students with opportunities to research the internet for relevant auditing issues.

In terms of support, this book is supplemented with student study guide (separate publication) and has a companion web site. The web site is interactive and provides revision questions with instant feedback and information on where to find relevant information in the book. Perhaps, a useful feature in future designs of this web site would be to supplement the already provided material with some audio or video presentations on the various key auditing issues and concepts in a form of commentaries by practicing auditors.

Overall, this is a comprehensive textbook, catering for auditing students at advanced undergraduate or graduate level and is appropriate for professional accounting and auditing education for students who intend to work in public accounting firms as well as those intending to work as internal auditors and public sector auditors.

The current deficiency of this book is that it is only referenced to the Australian Auditing Standards. The recent updated version of the eighth edition also incorporates Australian Clarity Standards. However, a reference to International Standards on Auditing as well as Australian standards, throughout the book, would enable a wider use of this text outside Australia.