Profession Selected Essay Example for Free

Profession Selected Essay An accountancy firm provides a vast number of services, such as accountancy, assurance, information technology and secretarial services. For the scope of this paper, we will select and focus on assurance services entailed by an external auditor on public limited companies in accordance with the requirements of the Companies Act. 1. 1 Research Methodology The research methodology adopted in this assignment shall utilize both primary and secondary data in order to attain sufficient information necessary for the job research on assurance services. The primary data will comprise a qualitative research carried out through interviews with audit managers and in-charge auditors of one of the big four accountancy firms, KPMG, which is shown in Appendix A. Secondary information shall entail relevant textbooks, journal articles and web documents as portrayed in the bibliography section. 1. 2 Daily Demands of a Professional Auditor in Public Practice The comments provided by the audit manager interviewed, shown in Appendix A of this paper are much in line with what is stated in auditing textbooks, with respect to the work of the auditor. Planning is the initial stage of the audit, once the auditor is selected and the directors sign the engagement letter (AAT Interactive Text Unit 17 2005, p 14). The audit strategy commences with the objectives of the audit, which normally are identifying key audit areas, nothing-potential problems, assigning the staff properly and facilitating the audit review (AAT Interactive Text Unit 17 2005, p 94). This planning step normally entails an examination of the industry, and the company’s management in order to ascertain the inherent risks of the firm. The flow of documentation and extent of controls present in the organization are also examined with the goal of setting the control risk. Once the inherent and control risks are set, the detection risk, which is the only risk within the auditor’s control, is established. The setting of the materiality level, which is an integral part of risk assessment lead to the end of the planning stage of the audit (AAT Interactive Text Unit 17 2005, p 96 – 101). The actual testing of account balances and transactions commences when the fieldwork starts, normally at the client’s premises. Tests of control will be applied on the internal controls present in the corporation with the aim of evaluating their effectiveness in detecting and preventing error and fraud. This aids the auditor in determining the substantive tests necessary. In organizations with effective internal control systems, restrictive substantive testing is usually carried out, which comprises audit test on the areas where reasonable assurance was not provided by reliance on the internal controls (AAT Interactive Text Unit 17 2005, p 15). The daily demands of an auditor are not only on testing, especially when considering the in-charge auditor. Direction and supervision of audit assistants is necessary in order to ensure proper co-ordination. Meetings with the engagement partner, manager and audit staff is also carried out during the audit, both at the planning stage, fieldwork and completion phase (AAT Interactive Text Unit 17 2005, p 110 – 114). 1. 3 Skills and personality traits necessary in an audit environment A generic answer was provided by the audit manager interviewed, in which he stated that technical, communication and computer application skills are necessary. Good appearance and ethical behavior were noted as regards the personality traits. We can further compound on such matters by amplifying the skills necessary and expounding the ethical attitude necessary for such profession. Communication includes three main skills, speaking, listening and interpersonal skills. Speaking skills comprises clear articulation, intonation effects and the pace and pauses adopted during the conveying of the message. During a conversation, both face-to-face and over the telephone it is important that we listen. Our ability in properly decoding messages and responding to his feedback even through a â€Å"yes† can build a positive relationship, which will ultimately enhance proper communication (AAT Interactive Text Units 22 and 23 2005, p 224). Interpersonal skills include a mixture of speaking and listening abilities. An individual with good interpersonal abilities will be highly effective in motivating staff, team-building and customer care, which are very important in auditing. Such important benefits are derived from staff who is able in negotiating and persuading other people, managing conflict and communicate informatively and supportively (AAT Interactive Text Units 22 and 23 2005, p 201). The computer applications and technical knowledge pointed out during the interview are also important skills. Computer software that is normally utilized by an auditor are office software like Microsoft word and excel, and accounting packages such as sage, which will be adopted by the client in order to record accounting transactions and provide the necessary reports. As regards the technical competence, which is frequently attained through formal training in a university needs to be further enhanced once achieved. A degree qualification is not an end, but a means to an end. It is therefore vital that once enrolling in such profession we continue covering important technical areas, such as accounting and auditing standards in order to progress our knowledge on such aspects. Indeed it is common practice for audit firms to induce and support staff to higher formal education relevant to the auditing profession to increase and widen their technical abilities. The ethical behavior outlined by the manager interviewed can be further illustrated with the aid of the code of ethics of accountants and auditors. An auditor is required to be independent and portray technical competence, integrity and professional attitude in his behavior and judgments (Cottell G. P. et al. 1990, p 29). Independence is achieved by not having close relations in the company, not accepting gifts from customer and the client does not entail a substantial part of the auditor’s income, which is outside the scope of the employee (AAT Interactive Text Unit 17 2005, p 25 26). Technical abilities are sustained through the license requirements, which will be further referred to in the following section. While the latter two, highly depend on the character of the individual and the attention devoted to his behavior. The individual interviewed outlined the importance of proper behavior as shown in Appendix A. 1. 4 Licensing Requirements for an Auditor The American Institute of Certified Public Accountants is the representative body in charge of licensing accountants and auditors in public practice (The American Institute of Certified Public Accountants). The person interviewed outlined this point. From such interview the case of technical competence and practical experience also emerged in order to attain such license. A degree majoring in accountancy is necessary from an accredited university, together with a number of years of practical experience with a licensed auditor working in public practice. 1. 5 Remuneration of an Auditor The point that initially an auditor employed in an audit firm will be remunerated a lower wage in relation to the industry arose from the interview. Indeed the interviewee outlined that an average wage of $20 per hour is achieved. This stems from the fact that at the beginning an assistant auditor would need considerable on the job training and could not be given a job alone. However, through progression and promotion, the wage can increase reaching a mean of $32. 21 per hour. The possibility of room for growth arose for such job. 1. 6 Opportunities and Threats of in an Audit Environment The audit manager highlighted the fact that a correlation exists between the industry performance and the demand for auditors, like every industry related job. In this respect, the better the economy the greater the job opportunities for auditors. However, the unification of a number of different countries in North America and Europe is providing the opportunity of international markets. As a result, the rewards that successful candidates can achieve once attaining the qualification and entering in such profession are improving (Successful Students get their just reward 2005, p 8). For instance, in the big four audit firms, like KPMG, secondment opportunities are frequently provided to staff, once they gain sufficient experience in the profession. This thus enables them to work in other countries and widen their practical experience on auditing. It was also noted in section 1. 3 that audit firms are supporters of formal education in order to improve the technical competence of staff. Therefore employees also have the opportunity to increase their education with the aid of the company. Such help may consist of study leave and even financial assistance on the course fee. In the industry such training opportunities are difficult. The manager interviewed showed his concern upon the main threat of an auditor, which consists of providing an incorrect audit opinion and losing the firm’s reputation. At the beginning of our employment in such profession, however the threat will stem from the increasing competition arising from the rise of students undergoing accountancy courses to commence working as auditors. In addition, such industry is considered as a monopolistic market, in which a vast number of clients and auditors exist (Shailer G. et al 2004, p 263). This leads to tough competition requesting the need of high efficiency and service quality, which will be exerted on a tougher selection of employees in the firm. Thus it is important that we enhance the skills necessary for an auditor, portrayed in section 1. 3, to overcome such threat. 1. 7 Final Thought – My Strengths and Weaknesses in relation to this Profession I am already involved in an accountancy course and therefore the technical skills are being achieved. My commitment to studies is also boosting me in such area. I also possess a good knowledge of computer applications software and always successfully managed to work in a team. The main weakness that I can presently identify is the inability to apply such technical knowledge in practice. This arises from my limited working experience in such area. However, I am confident that once I commence working as an assistant auditor, I will mitigate this problem through the on the job training provided and my dedication to such work. Appendix A – Questions and Answers attained from the interview 1. Is planning necessary in auditing? If yes explain what it entails? An external auditor is required by Auditing Standards to properly plan an audit before the commencement of the audit itself. This aids the auditor is assessing risk and identifying key areas of the audit. A properly set plan also promotes coordination and efficiency in the audit team. 2. What is main objective of the audit? The primary duty of the auditor is to prepare a report on the truth and fairness of the financial statements. 3. What are the salient daily demands during the audit fieldwork? Once the in-charge auditor starts the audit assignment, he should coordinate his and the teams efforts in order to complete the audit within the specified deadline. The internal control system should be checked first via tests of control in order to identify the internal control strengths and weaknesses, which will ultimately affect the audit tests carried out. This is followed by substantive procedures on the important elements of the financial statements. 4. Name the main skills that an external auditor necessitates? Apart from technical competence in accountancy and auditing, an auditor requires good communication skills both written and verbal and knowledge of computer applications. On advancement, management and leadership skills are also necessary in view, that he will be managing an audit team. 5. How should an auditor behave at the client’s premises? A professional attitude is a must in auditing. We have to keep abreast the fact that due to the lack of tangibility in a service, the customer will frequently seek tangible factors such as the behavior of audit staff in assessing the service provided. This is thus an important facet to sustain the reputation of the firm. Apart from dressing smartly, the auditor is required to behave ethically, paying particular attention in the communication style and words used when discussing the audit with the client. 6. What is the current compensation of a recent graduate in this profession? At the beginning, the normal average wage of an assistant auditor would be $20 per hour. Such low wage is provided at the commencement in relation to the industry in view of the on the job training necessary to such staff. Upon progression and promotion the employee can reach $32. 21 per hour. 7. What are the current opportunities in the audit profession? This profession is highly correlated with the industries performance. The more the companies incorporated, the greater the job opportunities for an auditor. The increasing unification of countries, like the European Union is also providing access to international markets. 8. Name the main threats of an auditor? The most critical threat that an auditor faces is the public exposure in instances where an incorrect audit opinion is provided and the organization faces financial problems. In these cases the reputation of the audit firm is destroyed, like Arthur Anderson in the Enron incident. The increasing competition in such profession is also exerting considerable pressure on efficiency and audit fee. 9. What are the licensing requirements to operate as an auditor in public practice? A special license is necessary to operate as an auditor, which is provided by American Institute of Chartered Accountants once sufficient technical competence and audit training are achieved. Bibliography AAT Interactive Text Unit 17 (2005). Implementing Audit Procedures. London: BPP Professional Education. AAT Interactive Text Units 22 and 23 (2005). Health and Safety and Personal Effectiveness. London: BPP Professional Education. Cottell G. P. ; Perlin M. T. (1990). Accounting Ethics: A Practical Guide for Professionals. Westport: Quorum Books. Shailer G. ; Cummings L. ; Vatuloka E. ; Welch S. (2004). Discretionary Pricing in a Monopolistic Audit Market, International Journal of Auditing, Vol. 8, Issue 3. Successful Students get their just reward, The News Letter, 29th June 2005. The American Institute of Certified Public Accountants. Legislative Activities and State Licensing Issues (on line). Available from: http://www. aicpa. org/Legislative+Activities+and+state+licensing+Issues/ (Accessed 21st May 2007)