In my off time I may get a chance to write another story for pop culture or horror stuff. One day I may get a chance to publish something until I just do this.
This is a paper I just turned in for College
Understanding the responsibilities and Code of Conduct for the auditor
David Vaughn
Phoenix University
Fin/590
Patricia Schroeder
3/30/2021
Understanding the responsibilities and Code of Conduct for the auditor
I stated in a post that we as people now live in the age of computer fraud and technology. With people looking for ways to divest and gain from their regular income both of these will be factors in how that is made possible. As stated in Audit and Assurance services 10e people will see accounting as a service that gives confidence in how money is spent and allocated. Rather it be in the forms of income taxes or payroll we are reliant upon accurate information. As investors or business owners to experience a lost of funds due to misstatements or inaccurate information can be deafening. In this paper the responsibilities of an auditor will be discussed as apart of attestation and assurance services.
Freddie Mae and auditor independence problems
Looking over the relationship to the company according to the video it clearly states that the relationship between Freddie Mae and Pricewaterhouse coopers can not allow them to be consultants during an audit (if they are the ones performing it). Upon further research I have learned that not only is the relationship between the two a threat to Auditor independence. But there are five other major Threats to the independence of an auditor. Using an internet research, I viewed the website (Corporatefinanceinststute) which gave; (1) Self-interest threat, (2) Self-review, (3) Advocacy threat, (4) Familiarity threat, (5) Intimidation Threat as threats to auditor independence.
What could each of these mean to Freddie Mae which is also now Barred under SEC rules and partially run by the government and Pricewaterhouse Coopers. Well initially before this paper I did a paper on Struggling companies and learned according to (JCPenney company info 2021), that any further actions for current shareholders would have to be done under court supervision and a broker.
In cases like Freddie may being barred by the SEC could mean that further court action may be necessary for current shareholders. Which is not the precise point of the paper but could be a reason for them to have a (1) self-interest threat and (5) intimidation threat. Sadly, enough according to the video Freddie Mae could in fact have infracted upon each of the Threats to Auditor independence. Making further action from them as possible auditors or consultants illegal because of self-interest threats and a litany of other problems.
Legal action
Looking over the schools’ data base I wanted to find the legalities of Auditor liabilities and read apart of an abstract discussing auditor litigation risk. I was not satisfied with the information, seeing as how that litigation similar to what Pricewaterhouse Coopers faces leads to them being barred by the SEC. In my own opinion reading that the litigation risk of auditors can increase the amount of bank loans and the likelihood of receiving the loan, I find it troubling. I feel that this should be a uncorrelated incident when you think about the impaired judgement of an Auditor when facing legal issues outside of or within an Audit. Litigation within this scenario to me sounds like a Self-review threat to the auditor. But let’s look over what each of these threats means and how it could correlate in these scenarios.
- Self-interest threat: “Exist when the auditor holds a direct or indirect financial interest in the company or depends on the client for a major fee that is outstanding.”
In this threat Pricewaterhouse Coopers is said to be a part owner or is running Freddie Mae which is clearly against rules of conduct. Also if this Audit has to start over Freddie Mae must pay all fees incurred before a continuance.
- Self-Review threat: “Exist when an auditor ir reviewing their own work. Or work that is being done by the same firm.” Freddie Mae has infracted this rule lso by allowing itself to be operated by pricewaterhouse Coopers.
- Advocacy Threat: “Exist if the auditor is promoting the client, to the point that their objectivity is impaired.” Pricewaterhouse Coopers exist as a consultant to Freddie Mae which makes them invalid as a credible source of a Audit.
- Familiarity Threat: “Exist if the Auditor is too personal close with the staff or family of the clients.” A self interest threat is basically the same thing so this also puts them at risk of bias.
- Intimidation Threat: Exist if the Auditor feels intimidated by the management or its directors of the client company, where the auditor cannot act objectively.” Of all the scenarios this seems to be the less likely but one I would not rule out as a possibility.
(ttps://corporatefinanceinstitute.com/resources/knowledge/accounting/threats-to-auditor-independence/
As a part of further research I also looked over a website for the AICAP https://www.aicpa.org to see what the liabilities of the Auditor would be. I looked over the topics covered and saw “Exercising professional judgement” a course or class. That topic I feel is the basis of this entire discussion “How should the auditor conduct themselves”. And with this many of the infracted threats I can see that most would feel that the Auditors judgement could possibly be impaired.
Conclusion
Professional conduct is necessary in most job industries. With this being said many employees may never face the pressures of having to behave in certain functions because that is just normal conduct. With liable parties involved it may not be expected of such professions to not adhere to what has given them a job in the first place. It is clear in this case that misconduct will lead to possible legal actions against this group of Auditors. Most would have not had to face consequences for what should have been a extraordinary but specific task. Letting poor planning and risk lead to what could be a historic case of lack of judgment.