Explain four (4) emerging issues in the auditing profession and the work of an auditor in general.

Answers

Answer 1

The auditing profession is continually evolving, and auditors face several emerging issues that impact their work.

Here are four key emerging issues in the auditing profession:

1. Technological Advancements: Rapid technological advancements, such as artificial intelligence, machine learning, and data analytics, are reshaping the auditing landscape. Auditors now have access to vast amounts of data, requiring them to develop new skills and techniques to effectively analyze and interpret data. The use of advanced technologies also raises concerns regarding data security, privacy, and the ethical use of technology in auditing.

2. Cybersecurity and Data Privacy: With the increasing frequency and sophistication of cyber threats, auditors must consider the risks associated with cybersecurity and data privacy. They need to assess the effectiveness of an organization's internal controls related to data security, identify vulnerabilities, and evaluate the adequacy of measures to protect sensitive information. Auditors may also need to address compliance with evolving regulations, such as the General Data Protection Regulation (GDPR) or other data privacy laws.

3. Sustainability and Environmental, Social, and Governance (ESG) Reporting: There is a growing demand for organizations to disclose their environmental and social impacts, as well as their governance practices. Auditors are increasingly being called upon to provide assurance on sustainability and ESG reporting. This requires auditors to understand and assess non-financial information, such as greenhouse gas emissions, social impact initiatives, and diversity policies, to provide stakeholders with reliable and credible information.

4. Audit Quality and Ethics: Maintaining high audit quality and upholding ethical standards are ongoing challenges for the auditing profession. Regulators and stakeholders expect auditors to demonstrate independence, objectivity, and professional skepticism. The profession is continuously exploring ways to enhance audit quality through robust methodologies, increased transparency, and adherence to professional standards. Additionally, the detection and prevention of financial statement fraud and misconduct remain critical areas of focus for auditors.

Overall, auditors must adapt to these emerging issues and stay abreast of the latest developments, technologies, and regulations to effectively fulfill their responsibilities and maintain public trust in the auditing profession.

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Related Questions

The below information was taken from the unadjusted trial balance and aging schedule of ABC Company on December 31, 2021 (fiscal year-end).
Accounts and related balances on December 31, 2021 (before adjustment):
Debit Credit
Accounts Receivable $47,000
Allowance for Doubtful Accounts $ 420
Sales (all on credit) 400,000
Sales returns 2,000
Aging Schedule of Accounts Receivable:
Age Amount % Uncollectible
0-30 days $15,000 2%
30-60 days 18,000 7%
Over 60 days 14,000 13%
Assume ABC Company uses the aging schedule of accounts receivable to determine uncollectible accounts receivable.
Instructions:
Determine the following:
a) Bad Debt Expense for the year ending December 31, 2021. (2 marks)
b) Allowance for Doubtful Accounts balance (after adjustment) on December 31, 2021.
(2 marks)
c) Carrying Amount (Net Realizable Value) of Accounts Receivable on the December 31, 2021
balance sheet. (1 mark)
QUESTION #2
The following selected information relates to DEF Company for the fiscal years ending on December 31, 2020 and December 31, 2021:
December 31
2021 2020
1. Sales (all on credit) $75,300 $61,500
2. Accounts Receivable 9,400 9,200
3. Allowance for Doubtful Accounts 1,300 1,000
4. Collection of Previously Written-Off
Accounts Receivable 55 70
Note: 1. On December 31, 2021, DEF Company estimates that 2% of its credit sales for 2021 will become
uncollectible.
2. The above balances in Allowance for Doubtful Accounts are after adjustment at year-end.
Instructions:
a) Calculate the actual amount of Accounts Receivable that were written-off as uncollectible during
2021.
b) Prepare all the necessary journal entries related to Accounts Receivable and Allowance for Doubtful
Accounts for 2021. Use the date of December 31, 2021 for recording purposes.

Answers

Bad Debt Expense for the year ending December 31, 2021:To determine the bad debt expense for the year ending December 31, 2021, we will have to calculate the uncollectible amount of accounts receivable for each age group.

We can use the given aging schedule of accounts receivable to calculate the uncollectible amount of accounts receivable as follows:Age Amount % Uncollectible Uncollectible amount0-30 days $15,000 2% $30030-60 days $18,000 7% $1,260Over 60 days $14,000 13% $1,820The total uncollectible amount of accounts receivable will be:Total uncollectible amount of accounts receivable = $300 + $1,260 + $1,820 = $3,380Therefore, the bad debt expense for the year ending December 31, 2021, will be equal to $3,380.b) Allowance for Doubtful Accounts balance (after adjustment) on December 31, 2021:To calculate the ending balance of the allowance for doubtful accounts, we will add the uncollectible amount of accounts receivable calculated in part (a) to the balance of the allowance for doubtful accounts.Accounts Receivable $47,000Allowance for Doubtful Accounts $ 420 + $3,380 = $3,800.

Therefore, the ending balance of the allowance for doubtful accounts on December 31, 2021, will be $3,800.c) Carrying Amount (Net Realizable Value) of Accounts Receivable on the December 31, 2021 balance sheet:The net realizable value of accounts receivable on the December 31, 2021 balance sheet will be equal to the difference between the total accounts receivable and the ending balance of the allowance for doubtful accounts. Therefore, the net realizable value of accounts receivable on the December 31, 2021 balance sheet will be calculated as follows:Net realizable value of accounts receivable = Accounts Receivable - Allowance for Doubtful AccountsNet realizable value of accounts receivable = $47,000 - $3,800Net realizable value of accounts receivable = $43,200Therefore, the net realizable value of accounts receivable on the December 31, 2021 balance sheet will be $43,200.

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