External Auditors Essay

1201 WordsFeb 23, 20135 Pages
1. (a). A company would want to hire a member of its external audit team for the experience they have. If they have been auditing your company for a while they know how the company works and what can be done to improve the internal audit department. The company could also want to hire them because it gives the company an insight of what auditors are really looking for and if an employee wanted to commit fraud they could gain insight and learn how to hide their activities better. (b). The hiring of former external auditors could cause there current independent auditors judgment to be impaired especially if they knew the former external auditor. If the external auditors had worked with the new internal auditors before it could cause them to question the books less because they personally know the internal auditor. (c). The creation of the Sarbanes Oxley Act and new regulations set forth by the PCAOB and other regulatory body's has made it harder for public companies to hire there external auditors to be a part of their internal audit or accounting teams. For an external auditor to go work for one of their former client they must be out of the external auditing field for one year and must not conduct any audits of their future employer for that year. (d). It is not appropriate for auditors to trust executives of the company. An auditor must act independently and must only judge the company on the financial reports that they are auditing. If auditors trusted executives they could miss something as little as a mistake or as large as a fraud scheme. 2. A. The client can be put in a more powerful position then the auditor in many instances. When an accounting firm is trying to cross sell such as Cooper was trying to cross sell to Phar- Mor the client is put into a more powerful position. The firm is trying to sell more services to the company and if they go against

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