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Client's Staff Management for Audit Practice Development by: Hameed Gbolahan Soaga B.Sc,M.Sc,ACA,ACIT Published by uPublish.

info Abstract The purpose of this study is to examine client's staff relationship management a s an important tool to achieve practice development - successful audit exercise, effective and efficient audit, client relationship building and business develo pment. This paper makes use of descriptive research method to examine the import ance, analysis, and influence of client's staff management on audit practice. It ascertains the strong impact of client's staff management on getting informatio n and explanations, retention and obtaining more clients by referrals, and maint aining objectivity and independence principles. It also analyses the causes and management of client's staff excesses. Audit firms should make training on ethic s a continuum and consistently train staff on the area of communication skill an d personality building in order to achieve good client's staff relationship. Aud itors should be smart: adopt alternative approach were system is poor, use publi c relationship and communication skills to improve the quality of financial stat ements. Introduction Client's staff management is the skilful handling by auditors of persons in the employment of a person or organization to which audit service is provided to in order to achieve a successful audit exercise, practice development and client re lationship building. Good client's staff management improves auditor's business; quality of financial statement, retention/continuity of audit engagement, more referral through current engagements, and improved goodwill that will attract mo re clients. Good client's staff management is required in other assurance engage ments, such as due diligence, management audit, and environmental/social audit a mong others. Spin off services performed such as accounting service (i.e. writin g up books, balancing books, preparing final accounts), tax consultancy, liquida tion and receivership, secretary services, legal services, financial advisory se rvices etc require good client's staff management as well. A good client's staff management involves the use of vital resources like excell ent verbal and writing communication skills, professional competence and due car e, public relations skill, strong interviewing skills, and experience in the fie ld of audit practice. The audit staff are expected to employ communication skill s and experience in the field of audit to relate with the client's staff, withou t familiarity that affects free and fair sense of judgement but with cordial wor king relationship, that is necessary for a successful audit exercise. At the end of the fieldwork, auditors should gathered all necessary information and explan ations that will assist in forming opinion on the true and fair few of the finan cial statements. One of the unexplored areas of research in audit practice is client's staff mana gement. Client's staff management is a crucial part of audit practice. This aspe ct of audit practice is giving little or no attention by audit firms. The better a firm can manage the relationships it has with its client's staff the more suc cessful it will become. It is practical: no working paper, no matter how explici t, can explain how clients' staff were managed during the audit process. Sound c lient's staff management grows with training, audit practice experience, adequat e communication skill among others. A good client's staff management is a key to effective and appropriate audit service and other professional services provisi on. When audit staff is in disagreement with the management a result of poor cli ent's staff management, such disagreement may lead to conflict with the manageme nt. Conflict with management can lead to the firm losing the client. However, Th e firm's income dwindles as the firm revenue comes from such fee. Audit firms should cultivate good client's staff management to achieve success i n practice. This paper consists of ten sections. The second section discusses cl ient's staff management and auditors' independence; the third section explains w hy client's staff act-up; the fourth section examines personality of audit staff while the fifth section presents client's staff intimidating practices. Section

six discusses audit staff and situation management on field; section seven exam ines unlawful acts of clients and their staff; section eight examines auditors a nd management fraud prevention and management; section nine discusses audit staf f wrong practices; and lastly, section ten is the conclusion and recommendations . Client's staff Management and Auditors' Independence According to Gunny, K., Krishnan, G., Zhang, T., (2007), the "regulatory view", the U.S. Senate (1976) noted that the long association between a client and the auditor may lead to closer identification of the auditor with the interests of t he client and could lead to impaired auditor independence. Thus, mandatory audit or rotation could enhance auditor independence. Gunny, K., Krishnan, G., Zhang, T., (2007), further identify the "economic view", auditor independence and audit quality could be impaired in the early years of auditor tenure because auditors could be more accommodating to the client to extract future quasi-rents to reco ver losses incurred due to low-balling. Thus, restricting auditor tenure could e xacerbate auditor independence rather than enhancing it. There are mix results o n relationship between auditor tenure and audit quality; while many results reve aled positive, many others find the opposite, however, they find that auditor te nure has a favourable impact on audit quality by mitigating audit and serious de ficiencies for the non-Big 4 auditors Gunny, K., Krishnan, G., Zhang, T., (2007) . Learning curve sets in and auditors gain mastery of client's business, system, environment (internal and external). One of the areas of client's staff management is audit staff ability to ensure i ndependence and objectivity in carrying out the audit assignment. The audit staf f should ensure that the familiarity between them and the client's staff does no t affect objectivity - their free and fair sense of judgement. Auditors' indepen dence is a critical component for an enterprise to have an audit that can add va lue to the organization. Familiarity threat impedes effective performance of aud it assignment. Statement on Auditing Standards No. 99 states that auditors "shou ld conduct the engagement with a mindset that recognizes the possibility that a material misstatement due to fraud could be present, regardless of any past expe rience with the entity and regardless of the auditor's belief about management's honesty and integrity" (AICPA; 2002, Statement on Auditing Standards No. 99, pa ragraph 13, p. 10). The audit report and opinion must be free of any bias or influence if the integr ity of the audit process is to be valuable and recognized. The audit team member s must not allow or welcome any form of excessive hospitability that affects the ir objectivity and integrity. Notable accounting scandals such as Nugan Hand Ban k (1980), One.Tel (2001), in Australia; Global Crossing (2002), Tyco Internation al (2002) in Bermuda; Parmalat (2003) in Italy; Nortel (2003) in Canada; Royal A hold (2003) in Netherlands; ZZZ Best (1986), MiniScribe (1989), Par-Mor (1992), Informix (1996), Cedant (1998), Waste Management Inc. (1999), Microstrategy (200 0), Unify Corporation (2000), Computer Associates (2000), Xerox (2000), Enron (2 001), Adelphia (2002), Bristol-Myers Squibb (2002), CMS Energy (2002) in United States. Others are Duke Energy (2002), Dynergy (2002), El Paso Corporation(2002) , Freddie Mac (2002), Halliburton (2002), Homestore. Com (2002), InClone Systems (2002), Kmart (2002), Merck and Co (2002), Meryl Lynch (2002), Mirant (2002) Ni cor (2002) Peregrine Systems (2002), Qwest Communications (2002), Reliant Energy (2002), Sunbeam (2002), and WorldCom (2002). Also in America are HealthSouth Co rporation (2003), Chiquita Brands International (2004), AIG (2004), and Bernard L. Madoff (2008); Barlow Clowes (1989), Polly Peck (1991) Bank of Credit and Com merce International (1991), in UK; and Satyam Computer Services (2009), Upcoming Karvy (2009) in India. In Nigeria, the recent sack of Managing Directors/CEOs o f banks for financial mismanagement has raised concerns regarding auditor-client relationship. As the relationship between auditors and client lengthens, a bond develops and auditors' professional scepticism may be replaced with trust. The decision to trust a client's management should be an ethical decision because ex cessive trust may impair auditors' scepticism, which auditors are required to ma intain by their professional responsibilities (Kerler and Killough; 2008). There is need for audit firms to expose there professional staff to different bu

siness areas and help ensure their objectivity and integrity. Rotation of audit assignments every two to three years is an approach to attain this. Hence, the f irm should continuously balance the need for team continuity with the need for c areer development and objectivity. Audit firms training are mostly on enhancing professional competence. Some practice ethics is limited to employees' annual co nfirmation on declaration of compliance with accounting ethical code of conduct and thereby sign off on ethics for the year. The greatest challenge bedevilling the accountancy profession is ethnicity. Audit firms should have a number of tra ining and awareness programmes every year to immune the audit staff morality aga inst unethical challenges in practice, moreover, ethical is not a black and whit e phenomena, it is a complex, delicate and inescapably devastating issue. Why Client's staff Act-Up? By nature, auditors break down the financial statements and explore the accounts and records with scepticism, in order to carry out detailed audit work. Auditor s work on control reduces opportunity, enjoyed by the client's staff, as an impo rtant step to take to reduce fraud. Auditors propagate control rather than trust . This is because of the need of auditors to reduce risk to a negligible level b y exercising professional scepticism and adhering to the requirements of the con trol of the audit process including, in particular, appropriate arrangements for direction, supervision, and quality control. These and more makes client's staf f view auditors as intruders. In accordance with International Standard on Audit ing (ISA) 200, the auditor shall maintain professional scepticism throughout the audit, recognizing the possibility that a material misstatement due to fraud co uld exist, notwithstanding the auditor's past experience of the honesty and inte grity of the entity's management and those charged with governance. Similarly, I SA 315 requires a discussion among the engagement team members, this discussion shall place particular emphasis on how and where the entity's financial statemen ts may be susceptible to material misstatement due to fraud, including how fraud might occur. The discussion shall occur setting aside beliefs that the engageme nt team members may have that management and those charged with governance are h onest and have integrity. Hence, while auditors see control as a solution; clien ts' staff view it as a problem. Contrary to auditors risk base approach, account ants in industry are performance focus. Expectation gap is another cause of client's staff misbehaviour. Many client's s taff expect that auditors should carry out accounting work alongside the audit. The auditors should come in and correct the poor accounting work done by the cli ent's staff. This is common among unlisted companies, largely due to the stringe nt disclosure requirements by regulatory authorities on listed companies not app licable to their unlisted counterparts. Such client expectations of auditors go beyond the actual standard of performance by auditors and impose additional duti es and conflicts. Management is primarily responsible for maintaining proper acc ounting records and preparing financial statements, which give a true and fair v iew, and comply law and regulations. According to ISA 315, an important manageme nt responsibility is to establish and maintain internal control on an ongoing ba sis. Management's monitoring of controls includes considering whether they are o perating as intended and that they are modified as appropriate for changes in co nditions. Hence, the accuracy and completeness of the accounting records are the responsibility of the Company's management. The auditor is responsibility to re port to the members of the company whether the financial statements give a true and fair view of the state of the Company's affairs and of the profit or loss fo r the year, and whether they are properly prepared in accordance with law. An example of expectation gap problem is stock, which often is a major item in f inancial statements; correct identification of stock and work in progress, corre ct ascertainment, record and condition assessment of physical quantities and pro per valuation bases of stocks are the responsibilities of directors. During stoc k take, the auditor is to attend the stock take as an observer. Client's staff o ften view auditor's presence as for physically counting stock, whereas auditor i s purely to witness stock take. Stock take is not part of auditor's responsibili ties. Client's staff may even expect auditor to prepare stock take instruction, which obviously is client's duty.

Stress is another cause of client's staff excess antipathy to auditors. It could be because of poor organisational system: poor filling system, locating support ing documents i.e. receipts, memo, schedule, accounts, invoices, etc are difficu lt. It can be a result of incompetence or lack of adequate training of the clien ts' personnel involved. Mere sighting auditor is stress inducing for some member s of client's staff. Another common cause is past ugly experience with an external auditor. Client's staff could generalise first impression: poor management of situation can create an impression before a client's staff that auditors from a particular firm or a uditors in general are terrible. There was an experience where the auditors by n o means talked about thorny issues during the fieldwork but the client's staff g ot awareness when management letter was presented. Auditors know more than the c lient because of their multidisciplinary experience, exposure to a lot of indust ries, in-house and on the job trainings, however, a good auditor will not brag a bout this. Often, client's staff are of the believe that auditors are mischievou s because of failure of an auditor to understand and appreciate the nature of th e client's industry; listen to the client's staff; advice client's staff modestl y; keep away from argument where the client's staff is obstinate and compassiona tely enlighten the client's staff of the consequence of the issue at stake. Personality of Audit Staff Auditor-client relationship skills are apparent through the auditor's personalit y. There are some audit staff not fit to be auditors, in the sense that the firm does not have the competence, time or money required to bring about the requisi te personality development. Personality of staff is an important and significant variable in client's staff management. Audit firms a times smear the image of t he audit profession by recruiting incapable hands and taking them to the field w ithout adequate training. Such green intakes ask infuriating questions that are elementary accounting in nature and is least expected from audit staff. Intensiv e training course on client's staff management will have the most striking effec t. Such training will support the effectiveness of the audit staff training in a ltering their attitudes by increasing their tolerance of client's staff behaviou r, as well as influencing their own tolerance of their own excesses. Well-traine d auditors are not dogmatic on issues that are not obligatory. Auditors must have a good communication and report writing skills. Communication skill is essential to an auditor's job right from the planning stage of the tas k through to writing up findings, conclusion and recommendations in a report. An auditor's role can be varied and will encompass a wide range of different commu nication methods including meetings, interviewing, telephoning, e-mailing, and r eport writing. Audit firms should develop an action plan to improve the way audi t staff communicate with others and the reports that they write in order to enha nce their performance. Audit firm should fill communication gap of audit staff b y identifying the different ways in which they communicate with others, identify their strengths and areas for development in their communication skills, unders tand how they can communicate effectively with different types of people and in different situations, practically improve communication skills, write a clear an d effective report for audit purposes and conclude on their main areas of focus in order to improve their skills. There was an experience an in-charge accountan t repeatedly asked a Chief Finance Officer (CFO) he does not understand the CFO' s explanation when he intended to state that he does not have the same opinion w ith the CFO's and will note the issue in the report, this episode ended up in a scuffle. Audit firm can accomplish improvement in audit staff personality through lecture s, supported by exercises, quizzes, and group case study work. The training shou ld be as practical as possible by involving the participants at all times and en suring that they are encouraged to reflect on what they can do to improve their skills. The style should be interactive, with the participants encouraged to con tribute their views and questions. The challenges that practitioners face when c onsidering training audit staff is often hard to find the time to devote to prac tice management, especially in a small firm with only a few staff. Moreso, as a practice grows, it is more likely to spend more time and resources addressing wo

rkflow and productivity issues. All audit staff should have the training and upto-date information that allow them to provide seamless, consistent services to clients. Training raises expectations. Audit firm should put in place regular tr aining and induction programme for the newly employed. This will assist audit st aff understand and develop the correct attitude to their career, be aware of per sonal responsibilities with regards to own skill development, lay down progressi ve performance and developmental goals to ensure that they become proficient at the full complement of core experience required in terms of their training contr acts, and manage time, stress and personal budgeting. Cordial working relationship between auditors and the client's staff is necessar y for a successful audit exercise. An auditor should spend the first contact wit h client's staff discussing thereby building rapport. The amount of information an auditor could obtain is determined by the relationship between auditor and cl ient's staff, hence, public relation skills is essential to auditors. Where the relationship is not okay, the auditor could be treated like a third party, which might use information to personal advantage. Client's staff relationship manage ment is crucial for a successful audit. Every time the audit staff have contact with client's staff, they have an opportunity to improve the firm reputation wit h the client and increase the likelihood of reappointment as auditors. An indica tion of pleasant relationship is the client push for the audit staff to be desig nated for during the next exercise. However, this could lead to familiarity thre at where the rapport is unethical. It is advisable to work smarter, not harder, this will aid audit team to work fe wer hours where there is a good client's staff management. Audit staff have to k now their client's staff. This makes the execution of the assignment easy to acc omplish. Audit staff should have a smart and friendly manner of handling client' s staff. Approach to issues is very crucial in obtaining information from client 's staff. Tactical communication skill is essential in the audit process: refrai n from using authoritative approach in obtaining information. This might arouse the anger of even a gentle client's staff. Direct questions and seemingly attack ing mode of inquiry in interrogating and gathering facts from the client's staff should be avoided. Audit staff should keep away from intimidating practices suc h as quoting standards and laws at every point in time before the client's staff . This could makes the client's staff assume that the auditor is accusing them o f illegality or connotes they do not have adequate financial and accounting know ledge. This kind of practice is common among qualified members of audit team. Client's staff Intimidating Practices As people learn from their many experiences throughout their lives, they form be liefs and opinions based on those experiences. People become more closed-minded or dogmatic after having learned from their lives "the way things go." As people age, they become more dogmatic or their beliefs and opinions on things become m ore "set in stone." Although there do seem to be many factors that could attribu te to becoming more dogmatic, age appears to be a major, common factor (Kelsey a nd Neumann: 2009). Client's staff could be stiff on old practice and fervent in resisting correction. Client's staff could put forward believe of being on the j ob for decade(s) and has been doing a particular practice ever since in a manner and cannot withstand somebody coming a day to correct his common business clich e even when such practice is against the standard and or statutory requirements. Experience as demonstrated that inertia sets in and the so-called staff with de cades' years experience inadvertently commits error. Client's staff could ask intimidating questions such as when did each of you bec ome qualified? How long have you spent in practice? What kind of audit assignmen ts have you carried out? And other irritating and anger provoking questions. Thi s is common among qualified members of client's staff. It is noteworthy that lon gevity of year of qualification can be synonymous with been out of date save qua lified accountant that continually update knowledge. Temperamental person may no t last in audit practice; such a person may give a harsh reply to infuriating st atements. Audit staff should manage the aggression of client's staff. Maturity i s greatly essential in handling the client's staff antipathy. Humorous hit-back that is not personal and cannot lead to hullabaloo is often appropriate response

. At the point of gathering information on the knowledge of the client business th at will assist the auditors obtain facts on general and specific risks areas as well as identify fraud factors; often clients' staff are infuriated on making in quiry on the business operation thereby impeding investigative independence. The y go to the extent of alleging that the auditors do not understand their job by asking questions on client's operation. Auditors are outsiders and can only know about the client business through enquiry. It is specifically expected accordin g to the auditing standard/guidelines that the auditor obtain understanding of t he business through questionnaire, observation, etc. Auditors must have unlimite d access to all the organisation information, collect essential evidence, be unr estricted in any way by the client's staff and any queries on the organisation b usiness and accounting treatment must be answered by the organisation. The Insti tute of Chartered Accountants of Nigeria (ICAN) Auditing Guideline: prospectus a nd the reporting accountant stressed this under professionalism and excellence t hat auditor should carefully consider whether there are matters which impinge on the nature of the business activities. Client filling system should be smart and organised. Because of poor filling sys tem, locating documents are difficult and lots of audit time are wasted, thus th ereby prolong the assignment gratuitously. Certainly, average client experience a number of review/inspection exercises aside statutory audit yearly, examples a re tax audits by federal and state tax authorities, various internal audit exerc ises, related companies inspection of records, among several others based on the nature of the enterprise business and structure. These raison-d'tre could make sub stantive tests, such as vouching, sighting of salient documentary evidence, a he adache. However, auditors should adopt alternative audit approach where the syst em is poor. This will enhance the audit, thwart squander of valuable audit time, and in the end enhance communication with client's staff. Client expects the same audit team members who have good understanding of the en terprise business to come every time, so that the client will save time and stra in of coming back on continual issues concluded in the previous year. Such usual recommendation can lead to familiarity threat; the independence of the audit st aff that recurrently goes for the audit may be jeopardised. Practically, this ma y be almost unfeasible for the reason that audit is one of the professions with the highest turnover rate the world over because of versatility of auditors. Mor eso, it is a training ground for aspiring and recently qualified accountants, ma jority of who in the end, progress to several respective area of specialisation in the field of finance and management. Audit Staff and Situation Management on Field The client's staff may not make available needed and necessary documents. They m ay say the trial balance is not ready yet; present unbalanced trial balance; ref use to give needed schedules; decline to make ledger accounts available; give ex cuse of being too busy and on that ground refuse to grant audience for inquiry. Client's staff may not be able to figure out the auditor's request, while Non-fi nancial measures could be the available facts to carry out the task. Auditor's i nventive analytical skill is germane. Heuristic skill is vital in audit process. At every time client's staff will always say they provided all needed and reque sted information even while they acted in sharp contrast. The reaction is edgy a nd terrible when inadequate audit exercise is carried out at the expiration of t he audit timetable. The funny end is the client pesky accusation that the audit staff are not up to it. The client pressures the firm and passes the blame to th e firm at the termination of the audit period. The audit team must keep the firm aware of the situation at the client's office. The in-charge accountant must keep the manager-in-charge and the partner(s) abr east of the situation on the field. This can be in form of a phone call or an email to the manager-in-charge and the partner(s). This is the way out of accusat ion of incompetency and public humiliation. Ultimately, the in-charge-Accountant should forward written memorandum stating official situation to date; hence, a temporary matters at the attention of partners should be forwarded to both manag er-in-charge and the partner(s). A file copy of such memorandum should be mainta

ined in the current audit file for future reference purpose. The audit team shou ld ensure the files are well arranged. Permanent audit file and the current audi t files should be adequately organised. This makes a good filing system. The for mat of filing used by the firm must be complied with. This makes review easy and convenient for the manager and the review partner. Audit trainees should not be allowed to go about to make enquiry without audit s enior vetting the issue to be enquired upon. This will protect the firm from emb arrassments as a result of its staff asking funny questions. Espirit-de-corp is a necessary tool; audit members must work as a team. Where a member of the team commits a mistake, such a member should not be reproached in the public. The tea m must devise a way of washing their dirty teeth elsewhere aside the public. Ordinarily, auditors know better than the client's staff. This is traceable to m ultidisciplinary exposure, challenges, regular training etc. However, auditors m ust not exhibit this in their behaviours towards client's staff. Auditors should operate at level neither lower nor higher than that of the client's staff; audi tors should rather operate at the level of the client. Auditor must display matu rity in managing aggressive and arrogant client's staff. You have to possess som e sense of humour to be in control of the situation. No matter how intolerant a client's staff is, a humorous auditor will change a frowned face to a smiling on e. Absolutely, at the end of audit exercise client's staff applauds such an audi tor most and often do not forget encounters. It will be marvellous how much the client's staff will appeal that the auditor should be at the next audit exercise . Unlawful Acts of Clients and Their Staff According to Milichamp (1978), Auditor must act scrupulously and correctly and i n accordance with the law. For auditor not to commit a criminal offence, he shou ld avoid: advising the client to commit a criminal offence; aids client in devis ing or executing a crime; agrees with a client to conceal or destroy evidence or mislead the police with untrue statements or knows a client has committed an pr osecutable offence and acts with intent to impede his arrest or prosecution. If an auditor discovers an unlawful act he will not usually disclose this to the po lice or other authorities unless: the client authorise disclosure, disclosure is required in the auditor's own interest; or the circumstances are such that the auditor has a public duty to disclose in observance of confidentiality code of c onduct. Comprehensive understanding of the client's business and deep investigation of i ssues to garner sufficient evidence is very important. Client could use legal fo rm over economic substance to defraud the enterprise like the case of Enron Spec ial Purpose Entities (SPE) to circumvent debt in the consolidated audited financ ial statements. For transactions or items that have inconsistent substances and forms, auditors must follow the substance-over-form convention in accounting. By this way, auditors can guarantee the quality of accounting information, regulat e the accounting, and promote the development of market economy (Chen; 2009). Au ditors' client management skill come to place in the adequately documentation of violation(s) of this convention, carrying the management, directors, and audit committee along on the implication and ability to convince the client to comply. Where all efforts failed, the auditors may disengage the account after careful risk assessment analysis. Conversely, auditors must watch out and professionally manage client's prank of hiding under commercial rule to evade legal reality fo r the purpose of profit objective. Specifically, managers try to manage the reported earnings as a result of bonus plans motivations (Healy, 1985), the motivations to reduce the political costs ( Cahan; 1992, Jones; 1991), or the motivations to satisfy the debt covenants (Swe eny; 1994, De Angelo et al.; 1994). The earning management motivations may exist also around the time of CEO change. On one hand, the CEO of a poorly performing firm may try to increase the reported earnings to prevent or postpone being fir ed. On the other hand, consistent with the findings of (De Angelo et al.; 1994), a new CEO may take a "big bath" in the year of change to increase the probabili ty of higher future earnings when his/her performance will be measured, especial ly when low earnings in the change year can be blamed on the previous CEO. Firms

may also try to manage reported earnings before going public. Because these fir ms usually do not have an established market price, their managers may try to in crease the reported earnings to receive higher price for their shares. For examp le, (Friedlan; 1994) reported that IPO firms made income-increasing discretionar y accruals in the latest period prior to IPO relative to accruals in a comparabl e previous period. On the other hand, the concern about the quality of accountin g numbers and its relation with the quality of the auditing process is increasin g over time following the periodical clusters of business failures, frauds, and the litigation (Tie; 1999, Chambers; 1999). In developing countries, one of the quandaries is often tax evasion schemes hoodwink as tax avoidance. Loss of confidence is a cankerworm; due to ethical scandals, the big Arthur Ande rson sink with Enron. Practice need to be long term oriented, unethical conduct barely provide benefits in the short run. Professional accountants claim to act in professional manner and in public interest, yet they are involved in aggressi ve and abusive tax avoidance, tax haven, tax shelters, schemed transfer pricing, tax evasion and in some cases close-eye on drug trafficking, money laundry and other similar bad practices by their clients. These immoralities has grown wide with far reaching consequences, the global financial melt-down is an outcome. Oc cupy Wall Street protests and similar protests in some western countries are the public outcry against non protection of public interest. Currently, accountants are called names, for example, in United States unpatriotic, in United Kingdom law offenders. The onus is on risk management. Where the firm assesses the risk and ascertain t hat the risk is too high to be mitigated, it is advisable to pull out of such en gagement or stick to its gun thus allow the client to go opinion shopping. Other wise, this will amount to a penny wise, pound-foolish situation. Like an example given by (Foote and Hora; 2007) of one international public accounting firm pai d US$6 million to defend successfully a lawsuit involving a client with US$20,00 0 annual audit fees. At least one major insurance company has responded by refus ing to insure accounting firms for legal liabilities (Whittington and Pany; 2008 ). Audit firm can reduce exposure to risk by operating as a limited liability pa rtnership (LLP), limit liability in the engagement letter base on the risk areas of the risky client, exist as a partnership or operate as an affiliate member o f an associated professional practice, give adequate training to audit staff, ob tain representation aptly, and take professional indemnity insurance cover. Auditor and Management Fraud Prevention and Management Even though internal control over financial reporting may appear to be well desi gned and effective, controls that are otherwise effective can be overridden by m anagement in every entity. Many financial statements frauds have been perpetrate d by intentionally overriding the substance by senior management of what might o therwise appear to be effective internal controls. Because management is primari ly responsible for the design, implementation, and maintenance of internal contr ols, the entity is always exposed to the danger of management override of contro ls, whether the entity is publicly held, private, not-for-profit, or governmenta l. When the opportunity to override internal controls is combined with powerful incentives to meet accounting objectives, senior management may engage in fraudu lent financial reporting. Thus, otherwise effective internal controls cannot be relied upon to prevent, detect, or deter fraudulent financial reporting perpetra ted by senior management (AICPA; 2005). External Auditors can reduce the risk of material misstatement in the financial statements due to management fraud by ma intaining an appropriate level of scepticism, brainstorming about fraud risks, a ddressing the risk of management override of internal controls system and the in ternal control auditors in order to ensure a true and fair state of affairs. How ever, the main remedies against the consequences of management fraud, especially litigation, are properly documented working paper in such a manner that average person will easily comprehend the information therein, and adequate and compreh ensive letter of weaknesses. Auditor should dwell a lot and document findings on override of controls for jou rnal entries or adjustments resulting in misstated financial statements and mana gement direct involvement in journal entries or adjustment to manipulate reports

. Auditor must be mindful and probe to the bottom where there are alterations to records, and change of the timing of transactions particularly for the ones clo se to the end of the accounting period. Auditors must go through statutory recor ds i.e. register of directors and shareholders, Memorandum and Article of Associ ation and other forms obtained through the Corporate Affairs Commission (CAC), m inutes of the meetings of the company. In addition, agreements between the clien t and third party should be thoroughly reviewed. These documents are vital and h ighly sensitive. Client's staff, particularly management can take advantage of t he ignorance of the auditors on one or more of these documents to perpetrate man agement fraud or manage earnings. A good client management can be an effective tool for fraud detection. (Zikmund, 2008) states that it is important to watch the client's staff mannerisms, body language, and overall demeanour. It is also important to listen to an individual 's tone of voice, willingness to volunteer information, and style of answering q uestions. Once an auditor establishes a rapport with the client's staff, he can proceed to the line of questioning associated with the audit. It is at this poin t that an auditor needs to be aware of any change in verbal or nonverbal behavio ur. This will aid the auditor in uncovering a fraud where rules are not always e ffective in exposing purposely disguised information by a dishonest client's sta ff. It is needed as a tool to know the client: identified as Customer identifica tion - Know Your Customer, in Know Your Money Laundering Reporting Responsibilit ies: an Overview for Members' Guidance, issued by ICAN. According to this public ation, accounting firms/accountants are required to establish and verify the ide ntity of a person or entity and the nature of business they do before entering i nto a business relationship. This will assist auditors to comply with the provis ions of the Acts in assisting the anti-graft agencies and the economy. Consequen tly, it will save the firm from collapse because of litigation and loss of reput ation. (Khan; 2006) states that corruption is distinct from fraud as it does not leave any telltale in the records of an organization and the auditors, who generally w ork with documents, find it difficult to play an effective role in fighting corr uption. There may be hidden facts behind a figure. Often, competent client profe ssional accountant sees virtually everything; however, auditor can detect what i s not strictly concealed from detection by the management. Scheme can be pretty discovered through behavioural means than through financial analysis. For audito rs to accomplish great and outstanding findings, interactive tools, which are qu alitative and thus behavioural, have to be deployed. There was an experience whe re management massively inflated operating profit by refusal to write off huge o bsolete assets that board resolution had sanctioned to be taken off the company' s record. In another incident, management refused to write off a huge debt the b oard had resolved non-recoverable because of the going concern status of the deb tor company. In the process of interaction with client's staff, auditors inadver tently stumbled upon minutes on each of the mentioned case in point. In a resear ch published by Alexander Dyck, Adair Morse and Luigi Zingales (2010), employees of the company uncovered 17% of cases, thus client's staff recorded the highest among people that brings corporate fraud to light. Every smart auditor would de finitely take advantage of this group of stakeholder Audit Staff Wrong Practices Although, auditor must be proficient in accountancy and have strong confidence t o effectively carry out audit engagement, this does not translate to loss of pro fessional behaviour. Audit staff could be pompous. Auditors should ensure that t hey add value to the clients business by recommending ways to improve the system . Aside management letter, which is formal way of passing across the recommendat ions on the observations made during the audit, auditors can add value to client 's staff by enlightening the client's staff on accounting treatment of salient t ransactions, best financial reporting practices, sound treasury management etc d evoid of distressing the apt carry out of audit, and obliquely render gratis acc ountancy service. Teamwork outperforms individual competence and speed. An audit team member could

be disproportionately thorough by taking up nearly all the parts of the task, l eaving insignificant portion for competent colleague(s). This renders the idle c olleague(s) redundant and create rift among the team members. The daunting staff is often an in-charge accountant with controlling power. Possible reason for th is attitude is selfish ultra zealousness to take the most of the on-the-job trai ning advantage, swank resume, create a scenario that the co-staff are worthless. Audit team members should eschew wrong practices such as internet browsing, chat ting, job search etc. These attitudes seriously affect limited audit time, diver t attention from serious audit business, and depict the audit staff and the firm as irresponsible and unprofessional before the client. Lateness to client offic e, early closure, and irregular punctuality to carry out audit functions by audi t staff paints the firm in bad light and destroy the image of both audit staff a nd the firm before the client. The appropriate safeguards against these are adeq uate and regular training, audit timetable, pre engagement meeting, good allocat ion of work, and supervision by the audit manager and partner. A manager was ama zed to see the numbers of hours an audit staff spent chatting and job searching through the setting on the computer system. Unscheduled visits, timely, regular review of concluded sections of the audit work could improve the behaviour of au dit staff. Audit staff may attempt to cover up by filling up the management lett er with knotty issues not examined, due to superfluous diversions, during the fi eldwork and exit meeting. Conclusion and Recommendations Client's staff relationship management is very vital for client relationship bui lding and practice development. To achieve a successful audit exercise, auditors must have cordial relationship with their client's staff without altering their objectivity. Poor client's staff management in audit practice affects both rela tionships with the client's staff as well as sense of judgement of auditors. A g ood client's staff management is a key to effective and appropriate audit servic e provision; it assists auditors to gather all necessary information and explana tions that will assist in forming opinion on the true and fair view of the finan cial statements of the firm. Information is the bedrock of an effective and efficient audit and this could on ly come up from the client's staff, so, auditors should have suitable tactics to issues, which are very crucial in obtaining information from the client's staff . Audit firms should avoid taking green auditors to field without adequate train ing and professional personality; auditors should be less dogmatic on issues tha t are not compulsory and material; auditors should adopt alternative audit appro ach where the system is poor. Ethics is the biggest challenge confronting the ac countancy profession, thus, practice should regularly train auditors on accounti ng ethics to uphold the professional morality of accountants to safeguard public interest. Audit firm should assess the risk and ascertain that the risk is not too high to be mitigated. Every audit firm should appraise client relationship v is-a-vis the firm's image, independence, client satisfaction (value added to cli ent), audit staff personality, fraud management, communication competence, techn ical capability and capacity, commercial/entrepreneurial capabilities. Findings and conclusions thereafter should be developed to improve client's staff relatio nship management. BIBLIOGRAPHY American Institute of Certified Public Accountants (AICPA), 2005, Management Ove rride Of Internal Controls: The Achilles' Heel of Fraud Prevention the Audit Com mittee and Oversight of Financial Reporting. Cahan, S., 1992, The Effect of Antitrust Investigation on Discretionary Accruals : A Refined Test of the Political Cost Hypothesis, The Accounting Review, Januar y. Chambers, R., 1999, The Poverty of Accounting Disclosure, Abacus, October. Chen, Yingxin, 2009, Use the Substance-over-Form Convention to Regulate the Rela ted Transaction, International Journal of Business and Management, Vol. 4, No. 3 , March 2009, School of Management Shandong University of Technology Zibo 255049 , China

Coenen, Tracy L., 2006, The Fraud Files Why didn't our auditors find the fraud? The Daily Reporter Publishing Co. Jan. 25 Companies and Allied Matters Act (CAMA), CAP C20 Law of Federal Republic of Nige ria, 2004 DeAngelo, H., DeAngelo, L., and Skinner, D. J., 1994, Accounting choice in troub led companies. Journal of Accounting and Economics 17 (1/2). Dyck, Alexander, Morse, Adair and Zingales, Luigi, 2010, "Who Blows the Whistle on Corporate Fraud?" The Journal of Finance, December. Ebrahim, Ahmed, 2001, Auditing Quality, Auditor Tenure, Client Importance, and E arnings Management: An Additional Evidence, dissertations work Rutgers Universit y October, 2001 Foote, P. Sheldon and Hora, Reena, 2007, Biometrics and Fraud Mitigation Followi ng SOX Friedlan,J., 1994, Accounting Choices of Issuers of Initial Public Offerings, Co ntemporary Accounting Research , Summer. Gene, Smith, 2005, Communication skills are critical for internal auditors. New Mexico University, Portales, New Mexico, USA, Emerald Group Publishing Limited Gunny, K., Krishnan, G., Zhang, T., (2007), Is Audit Quality Associated with Aud itor Tenure, Industry Expertise, and Fees? Evidence from PCAOB Opinions, Seminar presentation at City University, Hong Kong, and the Hong Kong Polytechnic Unive rsity, Hong Kong, China Handbook Of International Auditing, Assurance, And Ethics Pronouncements, 2007, Edition International Standard on Auditing (ISA) 2007 International Federation o f Accountants 545 Fifth Avenue, 14th Floor New York, New York 10017 USA ISBN: 1931949-66-2 Healy, 1985, The Effect of Bonus Schemes on Accounting Decisions, Journal of Acc ounting and Economics. ICAN Auditing Guideline: Prospectus and the Reporting Accountant, ICAN. Know Your Money Laundering Reporting Responsibilities An Overview For Memb ers' Guidance issued, ICAN Faculty 1 Jones, J., 1991, Earnings management during import relief investigations. Journa l of Accounting Research 29, 193and#8210;228. Kelsey, Pugh l., and Neumann, Margaret E., 2009, Effect of Age on Dogmatic Trait s, Department of Psychology, Missouri Western State University Khan, Muhammad Akram, 2006, Role of audit in fighting corruption, United Nations Mission in Sudan (UNMIS) Paper Prepared For Ad Hoc Group Meeting On "Ethics, In tegrity, and Accountability in the Public Sector: Re-building Public Trust in Go vernment through the Implementation of the UN Convention against Corruption" 2627 September 2006 St. Petersburg, Russia Lindow, Paul E., and Race, Jill D., 2002, Beyond Traditional Audit Techniques, J uly 2002. Journal of Accountancy, aicpa. Millichamp, A.H., 1978, Auditing (An instructional Manual for Accounting Student s). London: DP Publications Ltd. U.S. Senate. 1976. The Accounting Establishment. Prepared by the Subcommittee on Reports, Accounting and Management of the Committee on Governmental Affairs. Wa shington, D.C: Government Printing Office. Statement on Auditing Standards No. 99, Consideration of Fraud in a Financial St atement Audit (AICPA, Professional Standards, vol. 1, AU sec. 316). Sweeny, A., 1994, Debt Covenant Violations and Managers' Accounting Responses, J ournal of Accounting and Economics, May. Tie, R.., 1999, Concerns Over Auditing Quality Complicate the Future of Accounti ng, Journal of Accountancy, December. Whittington, O. Ray, and Pany, Kurt, 2008, Principles of Auditing and Other Assu rance Services, Sixteenth Edition, McGraw-Hill Irwin Wikipedia, 2009, Accounting scandals - Wikipedia, the free encyclopedia, 8 Octob er 2009. Wikimedia Foundation, Inc. Kerler, William A., and Killough, Larry N., 2008, The Effects of Satisfaction wi th a Client's Management During a Prior Audit Engagement, Trust, and Moral Reaso ning on Auditors' Perceived Risk of Management Fraud. Springer Netherlands Zikmund, Paul E., 2008, Reducing the Expectation Gap Forensic Audit Procedures,

August 2005 Written by: Hameed Gbolahan Soaga B.Sc,M.Sc,ACA,ACIT Article Source: http://www.upublish.info

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