Friday, October 18, 2019
Course of action Assignment Example | Topics and Well Written Essays - 250 words
Course of action - Assignment Example MAPR enhances ââ¬Ëindependence in factââ¬â¢ since limited interaction with any client reduces not only the pressure but also the monetary as well as other inducements, for auditing partners to sacrifice their reputation and independence so as to ââ¬Ëremain silentââ¬â¢. As a consequence, auditing partners might be enthusiastic to question management on financial reporting and creative accounting issues. Secondly, long audit partner tenure means creation of a comfortable relationship between auditing partner and client, which adversely affects a partnerââ¬â¢s show of independence. Thus such improvements as those can be brought by MAPR. The other reason why MAPR is best course of action is on the basis of on introduction of new/fresh eyes. Thus MAPR avoids ââ¬Ëstalenessââ¬â¢ emanating from repetitive previous engagements and thus will enhance quality and integrity of audit, since rotation permits the much needed ââ¬Ëfresh eyesââ¬â¢ to evaluate the firmââ¬â¢ s financial statements as well as accounting policies/practices (Ottaway, 2013). Evidence-the US general accounting office (GAO), current data on ââ¬Ërestatement ratesââ¬â¢ linking to ââ¬Ëerror or fraudââ¬â¢ in previous financial statements subsequent to the closure of Arthur Anderson in 2002 that demanded compulsory auditor rotation for more than 1200 firms. Thus the data indicates a marked rise in restatement rates for ââ¬Ëerror and fraudââ¬â¢ after auditor rotation. It is evident therefore, that from this research GAO provided a possibly persuasive research demonstrating that ââ¬Å"fresh eyesâ⬠actually do expose fraud and mistakes under a MAPR ââ¬âcomparable situation. This is apparent therefore, that MAPR promotes conservative and diligence decision making by partners as they will be alert, specifically at the end of their term, knowing a new auditor will be keenly inspecting their work with a pair of ââ¬Ëfresh eyesââ¬â¢ (Ottaway,
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