Challenges Facing Contemporary Auditors under the Following Aspects:

Discuss about the Auditing for Sophistication of Business.

Sophistication of business is favorable to the efficiency in the manufacturing and business of goods and services. The business sophistication assists in developing the competitiveness of the nation including the quality of business network of the country. In the competitive era, business organizations conduct business strategies and functions including the improved and developed technologies. Companies undertake the business functions with the improved means to provide better opportunities with respect to the quality of the products or services as well as for the individual firms. The increasing sophistication of business provides impact on the local supplier’s quantity and quality, development of the country, competitive advantage, value chain process in the business as well as marketing of the business products and services (Funnell, Wade and Jupe 2016).

However, the increasing sophistication in the business creates complexities in the activities with respect to the management and control for the production process as well as for the marketing process. Considering the globalization and highly developed technologies, complexities for the regulation of the legal and political factors also arise at the same time. Complexities in terms of managing the business activities, production processes, marketing and distribution including the presentation of financial information to the shareholders exist in the companies (Cheung 2015). However, the level of complexities depends on the nature and size of the business activities of the organization because in the small organizations or the companies that conducts the business manually experience less complexities. On the contrary, if the companies conduct business at large scale as well as by including the upgraded technologies, complexities level increases in such companies (Earley 2015).

Considering the increasing sophistication and the complexities in the business number of challenges faced by the contemporary auditors. Auditing is the process of examining and verification of books and accounts of the business organization to assess the accountability and transparency of business activities. The auditors are required to check the business transactions, books of the accounts, and other related documents to verify the compliance of the regulatory framework of principles and regulations of accounting and other business policies. In the phase of increasing sophistication of the business, auditors experience the challenges to verify the compliance of technological policies, patents, copyrights and other related documents. Further, the auditors also experience the challenges to verify and detect the material misstatements in the books of accounts and financial statements (Rikhardsson and Dull 2016). In the modern times, business information recognition takes place through technological software in which it s difficult to detect the core fraud and errors. Apart from that, in case there is misstated, disclosures exist in the financial statements or if there is omission from the disclosures, it is difficult for the contemporary auditors to detect the correctness of such omission in large number of transactions. In addition to this, auditors also face challenges on confirmation with the governance of the management and confirmation from third parties due to large number of transactions (Williams 2015).

The Increasing Sophistication and Complexity of Business

Globalization in the present era is defined as the incorporation of the increasing economy across the globe along with the business trade and financial flows in the regions. It involves the utilization and incorporation of the upgraded and developed technologies for the purpose of business activities in almost all the industrial sectors. Globalization involves the integration and improvement in the corporate sector with respect to the product and service quality, quantity and methods of conducting the products and services. The basic strategies included in the globalization are multi- domestic strategy, global strategy, international strategy and transitional strategy in the economy and industrial growth (Cheung 2015).

On the contrary, internationalization is the procedures by which the activities of the economy are stretch over the national boundaries. Many organizations fall under the category of multinational companies incorporating the business activities at the international level that involves foreign transactions. The companies are required to incorporate critical analysis on the capital, technological methods and software, production process and other business functions. The responsibility of the organizations is to maximize the profitability, maintain sustainability as well as maximizing the wealth for investors and shareholders. Such measures can be achieved by the organizations by following the international regulations and principles which sometimes creates complexities (Therisa and Sony 2016).

Complexities are not only involved in conducting the business but the contemporary auditors are also facing the challenges with the increasing internationalization and globalization in business environment. The factors that influence the challenges are economical, social, technological and political concerned with the business operations and auditing. Since the auditing is performed by way of examining and verifying the organizational movements in compliance with the regulatory framework, it becomes challenging to analyze each of the aspect (Parida et al. 2015). Contemporary auditors experience the challenges to examine the compliance of international trading regulations with respect to the foreign exchange rates, compliance of duties and taxes regulations and compliance of foreign corporation laws. Another challenge that the auditors have to face due to increasing globalization is to examine the large number of valuation principles for assets or raw materials for production or trading products. It becomes difficult for the auditors to perform the due diligence with respect to the activities performed across the national border (Rikhardsson and Dull 2016).

Auditors have to face challenges with respect to the management consultation since the globalization or international business process takes longer time than the usual processes. Therefore, while performing the auditing and stating the audit opinion, the process gets delayed beyond the date of annual general meeting in which the reports are required to be presented. Further, international principles are critical and involve transactions in foreign currencies hence contemporary auditors have to face challenges on consideration of appropriate exchange rates and dates for conversion of monetary transactions in home currency. Hence it can be said that the increasing globalization in business environment offers not only innovation and opportunities but also the complexities and challenges in each of the sector (Chan, Lo and Mo 2015).

Increasing Internationalization/ Globalization in the Business Environment

Auditing means verification of the business information in order to detect any fraud, errors or misstatement that may lead to affect the materiality on the financial information of the company. Accordingly, auditors’ duties include detecting the potential fraud or error in the financial statements and records as well as performing due diligence with respect to the compliance of several business policies. The process of auditing is undertaken to analyze the accountability, transparency and fair view of the business information for the use of the company’s stakeholders (Cohen et al. 2015).

The auditors are responsible to examine fair practice of corporate governance with respect to corporate social responsibility, policies on management responsibility, directors’ responsibility and such other business policies. Considering the requirements of the professional bodies, auditors have been placed with greater responsibility to check the compliance of valuation principles, standards on recognition of financial information and the presentation of financial statements. It is important to present the financial records and statements with true and fair view for the use of investors that assist them in making investment decision. Therefore, auditors have been given the responsibility to check the correctness of the accounting information in terms of amounts recorded, valuation methods used and valuation principles to recognize the same. Additionally, auditors are expected to make appropriate plan with respect to the nature, time and extent of audit procedures to perform the auditing of the organizations (Soh and Martinov-Bennie 2015). 

Reference List

Chan, K.H., Lo, A.W. and Mo, P.L., 2015. An empirical analysis of the changes in tax audit focus on international transfer pricing. Journal of International Accounting, Auditing and Taxation, 24, pp.94-104.

Cheung, J.C., 2015. Professionalism, profession and quality assurance practitioners in external quality assurance agencies in higher education.Quality in Higher Education, 21(2), pp.151-170.

Cohen, J., Ding, Y., Lesage, C. and Stolowy, H., 2015. Media bias and the persistence of the expectation gap: An analysis of press articles on corporate fraud. Journal of Business Ethics, pp.1-23.

Earley, C.E., 2015. Data analytics in auditing: Opportunities and challenges.Business Horizons, 58(5), pp.493-500.

Funnell, W., Wade, M. and Jupe, R., 2016. Stakeholder perceptions of performance audit credibility. Accounting and Business Research, pp.1-19.

Parida, A., Kumar, U., Galar, D. and Stenström, C., 2015. Performance measurement and management for maintenance: a literature review. Journal of Quality in Maintenance Engineering, 21(1), pp.2-33.

Rikhardsson, P. and Dull, R., 2016. An exploratory study of the adoption, application and impacts of continuous auditing technologies in small businesses. International Journal of Accounting Information Systems, 20, pp.26-37.

Soh, D.S. and Martinov-Bennie, N., 2015. Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting.Managerial Auditing Journal, 30(1), pp.80-111.

Therisa, K.K. and Sony, M., 2016. Enhancing impact of ergonomics in educational institutions: theoretical foundations and practical viewpoints.International Journal of Process Management and Benchmarking, 6(2), pp.133-146.

Williams, J., 2015. Does a neurodevelopmental movement program affect Australian school children’s academic performance? Unlocking Potential: A report. Australian Journal of Child and Family health Nursing, 12(2), p.12.