QUALITY IN AUDITS AND EXTERN QUALITY CONTROL Gabriele Hahne.
Post on 26-Dec-2015
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Introduction After the spectacular balance scandals a discussion
about the rise of quality in financial audits has came up
But to take any measurements which raise the quality in financial audits it is necessary to determine who understands what is meant by the term quality
What is quality in financial audits?Does it distinguish from the sight of the
contemplator?To answer these questions the term quality needs to
be defined first
1. Origin and Classification2. Quality in Business Administration3. Quality in services4. Quality in audits5. Own definition of quality in
auditing
Origin and ClassificationQuality:Origin from the Latin word "qualitas”Means "condition, characteristic, property or
condition “Already: objective quality view and a subjective
quality point of viewobjective: the nature of an objectsubjective: the evaluation or perception by the
viewer
Origin and ClassificationBoth classifications of objective and
subjective quality represent a unitDue to the subjective approach one can
already understand that there is not an absolute term of quality
According to this understanding subjective quality is dependent on the perceptions of the beholder
Quality in Business AdministrationAlso in Business Administration no
standardized criteria for "what is quality"Part of the economic literature:Fulfilling customer expectations is the only
correct approach,E.g. Peter Drucker:"Quality in a product or service is not what
the suppliers put in, it is what the customer gets out and is willing to pay for it."
Quality in Business AdministrationGarvin‘s approach divides quality in 5
classes:transcendent approachproduct-baseduser-basedmanufactoring-basedvalue-based
Quality in Business AdministrationIn the concept of quality, a study of R.W. Hoyer
and Brooke B.Y. Hoyer, eight "quality gurus” have been interviewed
They divide quality into two categories:Level One:
Quality is a simple matter of producing a product according to measurable and precisely defined criteria
Level Two:Regardless of measurable criteria that satisfy
customer expectations
Quality in Business AdministrationDefinition of Feigenbaum:
Quality is very tailored to the expectations of the recipient
Achieving a high level of quality is seen as a task of the entire enterprise, so:
Quality is a companywide task that affects all departments, the responsibility is of the CEO, but all staff is involved
Quality in Business AdministrationDefinition of Prof. Kellner:"Quality needs be the USP of any company,Every company and every business defines its
own quality andTrying to achieve a certain monopoly through
its quality, soThe core benefit of a company is its self-
imposed quality”
Quality in ServicesIn the service sector a large number of
different definitions exist, eg by M. BruhnService quality can be viewed as the
composition of a performance that is filled with a certain level of performance, from excellent to very poor.
The expectations for the performance level can be determined by the perspective of the recipient
Quality in ServicesThe International Organization for
Standardization (ISO) defines "quality" in their DIN standard for quality management as:
"Degree to which a set of inherent characteristics fulfills requirements"
Quality in AuditsFor definitions of quality the recipient of
services, the audited entities, haven’t been in the focus at all
So as one of the first, Leffson stated: Requirements for quality are:
Ability to judge the auditorFreedom of opinion of the auditor andProper judgments
Quality in AuditsAccordingly, quality audit was:
the suitability of the auditor (its ability to judge and sentence freedom) and
The audit procedures performed by him (proper discernment) to submit a trusted audit opinion on the conclusion
Here: does not account for subjective expectations
Quality in AuditsOther definitions are for example:"In testing the degree of compliance with
quality standards of testing by the auditor is to understand,"
Similarly, Niehus, "audit quality is the consideration of all relevant legislation and professional pronouncements in the conduct of the audit.
A clean shutdown on meeting standards, but what about audit quality
Quality in AuditsAnke Müßig concludes that quality in case of
examination is nothing more than the fulfillment of expectations
But what expectations?AP (reduction of audit risk)Management: accountant is finished as
quickly as possible and finds nothingSupervisory Board: Auditor informed
promptly, "if something is not right"
Quality in AuditsSo there is no standardized definition of
"quality in the final examination," nevertheless a lot of new laws and regulations have been legislate in the recent years in order to enhance this quality
Own definition of the term quality in auditsAccording the definitions of Prof. Kellner and
Feigenbaum, both the quality requirements of the company to its own quality standards and the expectations of the recipients need to meet the auditor services
At the same time, all legal and professional requirements have to be met
The definition must include product-related, manufacturing and value-oriented approaches
Own definition of the term quality in auditsQuality in audit does not increase by an external
quality control, but it increases when quality is the responsibility of the entire company, exemplified by the auditor and every employee.
The quality is the all-determining standard in an audit company, it is the USP of the firm
Any task is according to they companies own quality standard
At the same time, the auditor needs to preserve its independce at any time and certainly observe the legal and professional rules.
expected QualityQuality in the whole Audit
Company perceived Quality
legal requirements
professional requirements
Independence of the Auditor
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