ACCT 404 Week 2 Group Discussion Board Forum 1 Replies Example

Group Discussion Board Forum 1 Replies: Responding on Reasonable Assurance

ACCT 404 Assurance and Attestation, Group Discussion Board Forum 1 Replies

Thread by [Student Name]

The classmates and their arguments are composites; the textbook, Scripture and the peer-reviewed research cited are real.

Reply to Austin

Austin, you argued that auditors should be held responsible for detecting every fraud, because investors like the retiree in my thread cannot protect themselves. I agree that the profession has sometimes asked too little of itself, and Louwers et al. (2018) make clear that auditors must plan and perform the audit to detect material misstatement from fraud, not just from error. A guarantee is a different matter. To give one, auditors would have to examine every transaction, and even then a fraud built on collusion between employees and outsiders, or on forged confirmations, could pass a complete examination. The fee would rise sharply, and the promise would still be impossible to keep. Clients would pay for that promise, and so, in the end, would the investors it was meant to protect, through lower returns on the companies they own. Porter (1993) offers a better way to frame your concern. She separated the part of the expectation gap that comes from unreasonable expectations from the part that comes from deficient performance, meaning auditors who fail to meet standards they already have. Your point is strongest for that second part. When an auditor ignores red flags, such as receivables growing faster than sales, the failure is real and should have consequences. I would argue for enforcing the existing duty vigorously rather than replacing it with a promise no one can keep, which this week's ethics chapter frames as due professional care.

Reply to Bethany

Bethany, your thread argued that stronger independence rules would do the most to close the expectation gap, and I think you identified one of its two essential ingredients. DeAngelo (1981) defined audit quality as the joint probability that an auditor will both discover a breach in the client's accounting system and report it. Independence affects the second part: an auditor who depends on a client's fees may find a problem and still hesitate to report it. But the first part depends on competence and effort, and independence rules do not make an auditor better at noticing that inventory counts look inconsistent. This week's chapter on professional ethics treats both, independence alongside due care and competence, which suggests the profession sees them as partners rather than substitutes. A firm can be perfectly independent and still miss a misstatement because its staff did not understand the client's revenue contracts, and readers of the report would be no better off for the firm's independence. I would also add a Christian perspective to your argument. Proverbs 12:22 sets lying lips against those who act faithfully, and it is the faithful who please the Lord (English Standard Version Bible, 2001/2016). Faithful action for an auditor includes both looking carefully and speaking honestly about what was found. Rules can protect honest reporting, but only diligence can supply careful looking, so I would pair your independence proposal with stronger training in skepticism.

References

DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183-199. https://doi.org/10.1016/0165-4101(81)90002-1

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Louwers, T. J., Blay, A. D., Sinason, D. H., Strawser, J. R., & Thibodeau, J. C. (2018). Auditing & assurance services (7th ed.). McGraw-Hill Education.

Porter, B. (1993). An empirical study of the audit expectation-performance gap. Accounting and Business Research, 24(93), 49-68. https://doi.org/10.1080/00014788.1993.9729463