Question

It has been said that auditors must be independent in fact and in reality, because they must not be seen to favor one group such as shareholders over potential investors and providers of capital such as suppliers and banks. You are in a meeting where the CEO states that he cares more about giving "shareholders value" and therefore does not care about others. You are to take a position in favor of the CEO's statement and argue in his support or take a position against his statement. Required; Outline your reasons for or against (in form of bullet points). Why might a company refuse to accept an audit engagement of a firm? What factors would be compelling and why?

Answer 1

Taking a position against the CEO's statement, it is important for a company to consider the interests of all stakeholders and not prioritize one group over others. A company may refuse an audit engagement due to lack of expertise or resources, conflict of interest, or complex and inaccurate financial records.

Step-by-step explanation:

Position against the CEO's statement:

- A company should not prioritize one group, such as shareholders, over others because it is essential to consider the interests of all stakeholders, including potential investors and providers of capital.

- Focusing solely on shareholders may lead to conflicts of interest and damage the company's reputation.

- By prioritizing the interests of all stakeholders, a company can build trust, attract more investors, and ensure long-term sustainability.

Reasons to refuse an audit engagement:

- The firm may not have the required expertise or resources to perform the audit effectively.

- There might be a conflict of interest if the firm has previous or current relationships with the company or its executives.

- The company's financial records may be too complex or contain inaccuracies that make it difficult for the firm to provide an accurate assessment.