auditing Essay

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Auditing Theory and Practice
Case 1
WorldCom: A Focus on Professional Responsibility

Prepared by: EL Ahmadi Med Reda
Worked With: Ibtihal Slassi

Fall 2013

1- Auditor independence refers to the disinterest from the internal and external parties that could influence the professional judgment of an auditor. In other words, auditor independence is the lack of any interest that may create a threat or a risk of material bias regarding the reliability of the financial statement. Furthermore, the main aim of auditor independence is to improve the consistency and the reliability of information that might be used in decisions making. Another role of the auditor independence is to enhance the cost-effectiveness of …show more content…
Andersen was aware of the this issue ,however he did not insist for having more appropriate evidence to exercise his work independently.
4- According to paragraph 4of PCAOB AU Section 329, Analytical procedures can be defined also as “Analytical procedures are used as a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions. In some cases, analytical procedures can be more effective or efficient than tests of details for achieving particular substantive testing objectives”. The substantive test of details requires the examination of errors within each account in the financial statement and draws a general conclusion about the account. Therefore, the obvious difference is that the substantive test of details is more efficient when it comes to make a conclusion about certain account. In the case of WorldCom Company, Andersen relied on the substantive analytical procedures, which was not enough as a method knowing that the Company was a risk client and Andersen was not able to have some reliable evidences.
5- Top side journal entries are the adjusting entries that are manually recorded for preparing a consolidated financial statement. Top side entries are essential for any accounting department. However, managers use this method to manipulate and play with expenses and income accounts to perpetrate a financial statement by decreasing expenses and increasing revenues.
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