The fines that were issued against Deloitte China for Audit Failures. This is very recent, so I figured
it would be a good topic of discussion. Deloitte China, or Deloitte Touche Tohmatsu Certified
Public Accountants LLP are an audit firm based in China that were not following proper audit
procedures. During audits, Deloitte China was asking clients to select their own sample data for
testing rather than selecting the data themselves and requesting the required backup. In total,
there were 21 occurrences of Deloitte China asking the client to prepare data that the auditors
were required to prepare themselves. Due to this violation, they were fine greatly by SEC (they are
settling on $20 million in fines). SEC found that junior and senior auditors were at fault for this,
which was a result of lack of supervision from audit partners.
The audit failure occurred due to lack of training and supervision on the fault of the audit
partners. The junior and senior auditors were not under proper direction during the audits, so
wrongful acts were committed as a result. The best way to correct this problem is to ensure that
both junior and senior auditors have proper supervision throughout the entire audit - from the
preliminary stages to the final audit stages.
The COVID-19 pandemic has created challenges for audits as the world changed how most of us
work and businesses operate. d Before the pandemic, people went to the office and had in-person
face-to-face meetings. d Physical invoices and check payments were received. d If a copy was
needed, it was easily done with a press of a button on the copier. d Since the pandemic, people are
working from home, and virtual meetings are held. d Invoices are emailed and electronic payments
are required. d Auditors have also changed the way they are working. d They are working remotely
instead of at the client’s locations and virtual meetings are conducted to discuss the audit with
other colleagues or with the client. d Technology companies needed to enhance and strengthen
their programs to accommodate the demand of the world as business stand-alone servers are few
as they shift to storing data in the cloud. d What is concerning is to me the technology. d Is the
technology we have today able to handle any cyberattacks of tomorrow? d It appears that we are
one step behind after the cyberattack happen. d For example, during Covid, my previous employer
was attacked with ransomware. d Their system was down for 1-1/2 months which disrupted their
business tremendously. Technology companies such as Microsoft consistently are upgrading or
updating their system. d With my current employer, it seems that every time an upgrade or update
is completed, we issue with our system. d Either a custom report is no longer working or the data
warehouse is missing data.
For the discussion, I have chosen the article "current trends in the audit industry." This article
shows how the changes in the market for audit services and the economic environment have
impacted the operation of the audit industry. It has highlighted that the current audit industry is
facing many important issues that are addressed in the current trend of auditing. It includes the
impact of advances in technology and greater access and availability to data; the impact of an
increased focus to enhance their non-audit services with a specific focus on consulting or advisory
services; commoditization of the audit; and the relevance of the traditional audit and perceived
value (Current trends in the audit industry - international ethics standards, 2021). The mentioned
issues in the auditing are the major concern for the auditing industry that needs to be solved by
the professionals. Thus, this article has highlighted some of the important factors that influence
the current trends in the auditing industry, including firm revenue and growth; partnership model
and the threat of litigation; competition in the audit market; impact of emerging technologies on
the audit; governance within the global network structure; and the extent and quality of resources
in the labour market (Current trends in the audit industry - international ethics standards, 2021).
Here, I found the most concerning trend is the rising competition in the audit market. Nowadays,
basic audit services are provided by almost all auditing companies, so how can one company be
fitted into the competition? In general, some auditors of the company make some changes in the
lowering of audit fees that attract many clients' attention, but it is not always effective as the
focus should always be on the quality of auditing service, not the cost of the services. Thus, the
auditing companies need to focus on the costs of educating new auditors, the industry and
technical expertise level of the auditor and staff, access to funding and expansion in infrastructure,
and increased litigation risk and insurance costs to be in the competition. However, much-
advanced software is introduced to the auditing industry; the companies need to ensure the
proper utilization of it. After reading this article, I have found some changes in my opinion on the
current climate in auditing. Here, it is essential for all the auditors to get proper training in the
specific field along with a better understanding of five fundamental principles of accounting ethics,
so that company can stand out in the rising competition.
References
Current trends in the audit industry - international ethics standards (2021). Retrieved October 25,
2022, from https://www.ethicsboard.org/system/files/meetings/files/Agenda_Item_F-3_-
_Current_Trends_in_the_Audit_Industry.pdf
Deloitte. (2022, February 23). 2022 audit committee agenda: ESG, cyber risk, digital finance.
Retrieved from https://deloitte.wsj.com/articles/2022-audit-committee-agenda-esg-cyber-risk-
digital-finance-01645639384
Lynch, E. (2021, May 19). Trends shaping the future of audit. Retrieved from
https://info.kpmg.us/news-perspectives/advancing-the-profession/trends-shaping-the-future-of-
audit.html
Sjanifer. (2022, September 30). SEC fines Deloitte China for audit failures. Thomson Reuters Tax &
Accounting News. Retrieved October 30, 2022, from https://tax.thomsonreuters.com/news/sec-
fines-deloitte-china-for-audit-failures/
