The model that audit firms are a training ground for fresh graduates is slowly fading away. Many organizations demand more tangible value from audit work. which is hard for newcomers to deliver. In fact, most big audit firms require up to 10 years of working experience preference for top-notch staffs is driven by their multidisciplinary nature. They prefer experts in all fileds, thus discarding the old notion of only accountants being auditors. Today an engineer is also expected to be an auditor, among other professions. Furthermore, staff members in big audit firms tend to be highly trained, with some 75 percent or more being certified (certified information systems auditor, certified government auditing professional, certification in control self-assessment designation).
They also tend to be members of local and international professional organizations. The best audit staffs are also very skilled in the use of audit software to solve problems and perform data analysis many of them are also becoming integrated auditors by combining IT and business-audit skills. Talented and motivated staff requires challenging work to avoid boredom the contemporary business environment is volatile and dynamic. This calls for an audit beyond regular audit assignments due to the volatility in the environment, staff auditors increasingly engage in decision making processes. Liability in tort and under contract law of auditors to companies is currently a hotly debated issue. There are some arguments in favor and against extending the apparent legal duties of care to individual shareholders, purchasers of shares, and possibly other third parties.
Some argue that third parties rely on the integrity of audited accounts, and it would seem right that a legal liability should reflect that. Professionals are paid quite handsomely and should therefore be held accountable. If liability is not extended, then the public may perceive that the auditor is accountable to no one, it is needless for the auditor to exercise skill and care. and therefore, accounts are not reliable and are of little benefit. Where a company suffers losses from fraud and theft caused by the auditor’s negligence, the current existing legal remedy by the company against the auditor is appropriate. However, if the directors overstate assets and the auditor fails to discover this the company does not suffer a loss. However the shareholders or potential shareholders may suffer a loss, and it is rightful they that they should seek compensation from the auditor or auditors.
Those who do not subscribe to this school of thought articulate that it is unreasonable and unrealistic to say that auditors have a liability in an indeterminate amount for an indeterminate time to an indeterminate class of persons. Practical difficulties in deciding whether accounts were relied upon or not may present a goldmine for lawyers. The current legal framework sees the purpose of preparing and auditing accounts as assisting shareholders in assessing the stewardship of directors, and not in assisting investors in their investment decisions. They conclude their arguments by stating that audit fees would be very high if full liability for investment decisions were taken. It is this extension in auditors’ liability that has led to the rise in audit lees, especially by the big audit firms, as they have to incur many expenses, including insurance covers for professional indemnity. For instance, in the case of Kingstone Cotton Mill Ltd and that of London and General Bank, the court ruled in favor of those who wanted auditors‘ liability extended.
Internal audit process is paramount in a company’s governance mechanisms, as it evaluates the company’s activities, procedures, or controls and ensures that they are sufficient and in compliance with both the guidelines for human resources and recommendations of senior management, internal audit also helps the organization in adhering to regulations and industry practices. Research shows that internal audit plays a key role in improving the organization’s governance procedures, internal and external auditing are different professions that are distinct and not mutually substitutable. According to KPMGs. an audit committee conducting an internal audit shares the risks faced by the organization. With the increase of risk management in organizations internal audit becomes indispensable. To conclude, audit firms should not charge exorbitant fees to clients. However, with the rapidly changing busmess environment, increased demand for quality work and extension of auditor’s liability, firms have to rewse their fees. Thus, the real reason for charging high audit fees is not a manifestation of unscrupulous and unethical practices, nor lack of principles on the part of audit firms.