Explicit pressure

The main job role of the editor is to look into all the financial records and documents. There they examine all the records and documents minutely to ensure that the accuracy is maintained. They also check the tax payment of the company so that it is done on time and appropriately. The level of efficiency of the organisation’s operation is monitored and managed by them through the assessment of the financial operation. The auditor needs to provide the suggestion and solution regarding the cost reduction, profit and revenue increment. There at the time of doing their job, there are lot of pressure for the auditor in the job. This pressure is in discussion in the academic as well as in the professional circle of the field. The origin of this type of pressure can be from the client as well as form the employed firm’s management side (Hatfield et al., 2011). The pressure from the client can be implicit or explicit in the organisation. These pressures affect the whole work dynamics and the client auditor relationship.

 

[Source: www.slidesharecdn.com]

There are explicit pressures from the client side in the organisation. The pressure can be quite intimidating at some times. The total dynamics of the relationship management with the client from the auditor side still generally do not get affected by the explicit pressure from the client side. The auditor acts as par the ‘General accepted accounting procedure’. But there are times in their work when the clients openly ask to auditor to interpret the accounting processing with leniency (Bennett et al., 2015). There are some open indications that the future fees of the accounting firm would be higher if the auditor show the leniency in the interpretation and help the client firm in their management of the business. The explicit pressures that are given from the client side may sometime face adverse condition. Like some time the aggressive explicit pressure from the client side may push auditor to pursue strict GAAP guideline and not the lenient approach offered by the client.

There are some implicit styles of pressure from the client side. These pressures are not directly communicated but implied in the process. There are times when the managers from the client side discuss with the auditor about the way the auditor can realign his approach with the interest of the organisation (Koch and Salterio, 2015). Here the mutual interests are highlighted in the discussion and the client side management tries to find out the solution in such scenario which would be acceptable to the client.  In such scenario the pressure is implicit on the auditor to find a solution which would be acceptable to the client. The mutual interest indicates a motivating factor for the auditing firm that is the continuation of the profitable relation. The customer relationship management approach of the auditor firm may look for the evaluation of the service by the client organisation. This is also implicit pressure on the auditor (Bennett et al., 2015).  This implicit pressure is high when the market competition of the auditing firm is considered. The market competition of the auditing firm is high and there is pressure on the firms for the fees. In that context the auditor of the firm has an obligation in the retention process of the profitable clients.

Implicit pressure

In the relationship based marketing the development of the good relationship aims at the delivery of customer’s expected service (Knox et al., 2007). There happy customer is easy to retain. So in that context the relationship between the client and the auditing firm depends on the auditor and how he delivers the service that makes the client happy. The auditor report must be useful to the stakeholder of the company who are external in nature. Here the sceptic attitude of the auditor is not welcomed by the management of the client company. Based on this entire thing the client would evaluate the audit firm’s service quality. Here this service quality evaluation CRM tool and the other implicit pressure would force the auditor to compromise in that situation (Hatfield et al., 2011). There the better service delivery according to the expectation and making the client happy is important for the auditor to continue this relationship. The aggressive explicit pressure and the absence of the CRM tools would influence the auditor to hold on to their ground and follow the GAAP procedure.

 

[Source: image.slidesharecdn.com]

Conclusion 

The relationship between the client’s organisation and audited firm are much more impactful than the explicit kind of pressure that some time come in the way of auditor. Under such condition the ethical dilemma in the work process creates tension for the auditor (Espinosa-Pike and Barrainkua, 2016). Under such situation the reputation of the audited firm, level of experience of the auditor and the process of conflict resolution makes the difference in the auditing process.

The process of auditing is the examination process of the financial report that the organisation presents in the form of the annual report. Here the auditor must be someone who is independent from the operation and the organisation. The auditor makes sure that the position that is reported in the financial report must reflect the position of the company financially at that time.

The financial reports of the organisation are prepared by the management of the organisation. Here the preparation of the reports needs to be as per the rules of the accounting process standards. Then the reports are produced to the director of the organisation for the approval and in due process it gets passed. After that the auditors come into the picture and they start examining the internal and external situation of the business to gain the better understanding about the situation of the business (Lombardi et al., 2014). Then the auditor would start examining the financial report of the organisation for risk evaluation and assessment. In this part the implication of the risk on the organisation and its financial position is evaluated along with the possible suggestion in this regard. After the risk identification and the internal control identification, the auditor looks for the evidence for the financial report accuracy in view of risk and control situation. The auditor would judge the trustworthiness and fairness of the financial position representation and stated cash flows. The report would also be evaluated in the light of the financial accounting standards.  The process is completed when the auditor makes the report of the audit done. This audit report is for the members and the shareholders of the organisation. In this whole auditing process the use of technology made a huge amount of change in the process of auditing. The opinion in the audit report is based on the historical data. Now the information provided in the audited report need to be useful and relevant for the decision making (Byrnes et al., 2015). In that context the changing scenario demands different approach in the auditing process and also in the information delivery to the relevant stakeholders like the shareholders, creditors and other investor.

Client-auditor relationship

 

[Source: www.pwc.com]

In the total auditing procedure the auditor plays an important role. They discussed the scope of the process with the organisation at the beginning. There the auditor may be asked some additional requirements of the organisation. The auditor would consider based on the accounting standard’s scope and would judge and produce the opinion independently and objectively (Byrnes et al., 2015). In the investigation of the financial report the auditor would ask several questions to the responsible person of the organisation in that regard. These questions could be written structured formal questions or informal unstructured questions. They would also take the written type of conformation from certain persons like the debtor of the organisation. They would also observe and perform certain controlled test in the process to be certain of the financial figures. In this process the auditor would not be able to look into all the transaction related documents and that is why this kind of test is important. They also do not check the entire detailed figure in the financial report. The incorporation of the technology is enabling the auditor to produce the financial statement in continuous manner. The more relevant information delivering through the report would consider the usefulness of the information in the judgement making and risk evaluation for the different shareholder. The use of technology is enabling the auditor to observe the things firm a distance with much more efficiency. The use of technology would make the judgement about the financial position of the company much sharper the analysis of the risk would be much more pointed (Lombardi et al., 2014). The technology is also helping the auditor to complete certain task much more easily. This is reducing the time pressure on the auditor.

 

[Source: www.diss.com]

Conclusion

An independent auditor has the responsibility to show the fairness in the process of accounting and the produced report. The evaluation of the financial and material position, cash flow and operation related statements must show the adherence of the recognised standard of accounting (Turley and Zaman, 2007). Like the management is responsible for the development of the financial position but the auditor evaluate that and expresses the opinion. The auditors look at the information from a top view position to provide to the point opinion which is useful for the stakeholders.

In the above two process the main context is the documentation process of the audit. The auditor is filling up the checklist in one picture meticulously. The use of paper and the pencil is done for the field work of the audit process. In recent times the use of technology came in the process. On the other hand the other picture shows that people are so tired in the checking process. The individual accountants are sleeping and the auditor is in the work. This shows that lengthy process of the documentation and the financial figure checking. This two picture shows that in the field work people are much more enthusiastic in the work (Wooten, 2003). Whereas at the time of checking of the financial figure and other transaction related documents of the organisation people are feeling less engaging. It also can be infrared from the picture that the auditors are staring out the process much more enthusiasm but at the end of the checklist documentation process they are feeling tired.

Audit process

Below two pictures shows two different type of impression of the auditor. In the left hand side of the picture there is general sense of confusion. On the other hand the other picture shows the sceptical attitude of the auditor. Making valuable judgement in the auditing process is an import thing (Wooten, 2003). At the time of judgement there would be general confusion in the mind of the auditor. Had there been monticules back checking process in the beginning process there would be less confusion in the judgement development.  The lacklustre attitude is shown in the above left picture would result in such confused state at the time of judgement development in the audit report. On the other hand the general sense e of scepticism is good for the auditing process (Nelson, 2009). It improves the accuracy of the judgement development and risk factor identification for the organisation. The data of the back checking process need to be critically evaluated to identify the actual risk factor and also to identify any fraudulent approach taken by the organisation. In the above right side picture the people are enthusiastically doing the field work in the auditing process. Similarly the auditor with the same rigor is evaluating the information to arrive at correct judgement and right risk identification. In both the right side pictures the impartial nature and objective process following is done.

Conclusion 

The process of auditing is long and time consuming process. There are times when the audit committee becomes lethargic in the process and there the general confusion prevails in the process. A well maintained auditing procedure helps to arrive at right judgement (Nelson, 2009). The sceptic attitude of the auditor is also helpful to find the fraud and error for the development of right opinion of the presented information.  

 

[Source: www.web.mnstate.edu]

Reference

Bennett, G. B., Hatfield, R. C., & Stefaniak, C. (2015). The Effect of Deadline Pressure on Pre?Negotiation Positions: A Comparison of Auditors and Client Management. Contemporary Accounting Research, 32(4), 1507-1528.

Byrnes, P. E., Al-Awadhi, C. A., Gullvist, B., Brown-Liburd, H., Teeter, C. R., Warren Jr, J. D., & Vasarhelyi, M. (2015). Evolution of Auditing: From the Traditional Approach to the Future Audit. Audit Analytics, 71.

Espinosa-Pike, M., & Barrainkua, I. (2016). An exploratory study of the pressures and ethical dilemmas in the audit conflict. Revista de Contabilidad, 19(1), 10-20.

Hatfield, R. C., Jackson, S. B., & Vandervelde, S. D. (2011). The effects of prior auditor involvement and client pressure on proposed audit adjustments. Behavioral Research in Accounting, 23(2), 117-130.

Knox, S., Payne, A., Ryals, L., Maklan, S., & Peppard, J. (2007). Customer relationship management. Routledge.

Koch, C. W., & Salterio, S. (2015). Effects of Client Pressure and Audit Firm Management Control Systems on Auditor Judgments.

Lombardi, D. R., Bloch, R., & Vasarhelyi, M. A. (2014). The Current State and Future of the Audit Profession. Current Issues in Auditing, 9(1), P10-P16.

Nelson, M. W. (2009). A model and literature review of professional skepticism in auditing. Auditing: A Journal of Practice & Theory, 28(2), 1-34.

Turley, S., & Zaman, M. (2007). Audit committee effectiveness: informal processes and behavioural effects. Accounting, Auditing & Accountability Journal, 20(5), 765-788.

Wooten, T. C. (2003). Research about audit quality. The CPA Journal, 73(1), 48.