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Title An evaluation of the engagement decision as exercised by medium audit practice
Full text http://hdl.handle.net/10210/782
Date 2008
Author(s) Steyn, Dirk Andries
Abstract The audit profession has been affected by several public corporate failures and accounting scandals since the turn of the 21st century. The irregularities that lead to the collapse of Enron Corporation also resulted in the demise of Arthur Andersen, their appointed auditors. Industry regulators and lawmakers reacted to what seemed to be a never ending spate of accounting scandals through broad consultation with stakeholders. This lead to numerous new legislation and international auditing standards such as the introduction of the Sarbanes Oxley Act in the United States of America, local proposed amendments to the Companies Act, no. 61 of 1973 as well the enactment of the Auditing Profession Act in 2006 - all in an attempt to address concerns around the quality of audit work and to restore the trust in the audit profession and the assurance that it provides. These recent events in the profession have however been preceded by consolidation within the industry between the largest international auditing firms. Many stakeholders have been concerned about this consolidation in terms of its impact on competition within the audit services market and the impact of competition from the "Big Four" on other market participants. Many studies have concluded that it has become very difficult for firms in small and medium practice to compete against the larger international audit firms, especially for the audits of large multi-national companies. The many statutory changes resulting from reaction to corporate failures have further impacted on the cost of training staff and updating systems and methodologies - costs which further hamper the ability of medium and smaller audit firms to compete with the larger international audit firms for business. Considering the South African audit industry, this study focuses on the engagement decision process of registered auditors in medium practice in order to determine in what manner their decisions are impacted by motivational drivers within the industry. This study continues to research the engagement decision process, to consider risk evaluation at the core of the engagement decision and also concludes on the audit procedures that typically form part of the engagement decision of registered auditors in medium practice. The findings of this study suggests that practitioners in medium audit practice are commercially predisposed during their engagement decisions. This commercial predisposition, which is the likely result of significant competition within the auditing profession in South Africa, does impact on the procedures performed by practitioners during their engagement decisions to such an extent that they may be exposed to significant risk during many of their engagement decisions. This study continues to criticaly analyse those procedures pertaining to risk assessment, risk mitigation, the use of third party information during engagement decisions and other audit procedures performed by practitioners during their engagement decisions. From these findings, risks are identified and commented on with specific consideration to their impact on the auditing profession at large. In conclusion, this study recommends actions to practitioners, regulators and professional institutions pertaining to engagement decisions by practitioners in medium audit practice, in order to mitigate the impact of those risks identified from the findings of this study. - Prof. Ben Marx Prof. Thea Voogt
Subject(s) Auditing in South Africa; Auditors in South Africa
Language en
Type of publication Thesis
Repository Johannesburg - University of Johannesburg
Added to C-A: 2008-12-22;03:49:53