It has always been a common notion that accountancy firms that are highly valued, respected and considered as a giant of the market will conduct or will provide the best available services or will at least render the services which are above par as compared to other stakeholders in the market. However, this common notion has no stay when considering their chances of performing bad audits.
Audits are not right or wrong but audits are basically in compliance with the standards, or they may have failed to be compliant with the relevant standards. Good accountancy firms have always known for their big-scaled market and huge clientele, they have reached to such by rendering some extra ordinary services, but in some instances, they may have failed to carry out their core responsibilities due to some of the very basic level reasons.
Good accountancy firms, usually in the current scenario, are called as BIG-4. These firms are always perceived as performing best audits, but in certain situations, it may not turn out to be true. Regulators tend to have strict and detailed monitoring over these accountancy firms as compared to other firms. Because of this, major issues and non-compliances are identified in their audits although they might not have performed it very badly. Another due cause to this is the incompetence with specialized industries’ audit due to which key areas or complex areas seem to lack due consideration which it should have been given thus understating the overall quality of the audit.
Sometimes non-availability of requisite resources such as systems related expertise, competence of audit managers and newness of audit team may cause hardships in meeting up the expectations of the regulators. At times, but rarely, personal interests of audit engagement leaders and close association with their clients may result in complacency and become difficult to report what has been found out and identified. Personal interests and personal preferences may result in bad audits.
Availability of other accountancy and auditing firms will make the client use intimidating measures against audit firms and it will become a cause to lose audit client for even the good audit firm. Multi-national clients who have huge scale of business and is considered to be a high-profile client regarding market perception and they cause undue damages to the quality as audit firms will tend to have a lighter hands over their audits and compliances due to fear of potential loss of revenue if expectations of the client are reversed.
Another important factor that has come to notice for bad audits is the limited availability of data to audit firm which limits their scope and will tend to escalate the hidden matters and fraudulent functions. Strict deadlines have always been the cause to perform the given functions efficiently thus compromising over effectiveness and quality of the audits.
Average accountancy and audit firms have limited clients, and thus to gain further clients and consultancy aspects of the market, they tend to do things quite nicely so that they can raise their probability of getting more clients and services. However, as regards big firms such as BIG-4 thy usually have a huge clientele, they just need to maintain their clients. In order of such maintenance, they need to give certain unwanted and unwilling favors for potential retention and continuance.
Lastly, all good firms have very good screening, acceptance and continuance criteria regarding the selection of engagements and clients. But in the periods of cost pressures, some audit relationship partners tend to by-pass their own and network firm’s policies and accepts, continues to do those clients and engagements which are perceived as having high risks.
It should be considered as a prime and foremost responsibility for all the relevant stakeholders of this esteemed profession; be it the regulators or the auditors, to carry out the best within the defined limits and scope and to protect the society’s and investors’ interests to the maximum.