Abstract
This study aims to explore the extent of external auditors awareness of the requirements of the International Standard on Auditing No. 260 (Communications with those charged with governance) on audit quality and to shed light on the effectiveness of the communication process based on auditors actual experience. A mixed method approach was employed to achieve the study objectives. The analysis of 116 questionnaires concluded that the requirements of the ISA 260 enhance audit quality, but the two-way communication between Jordanian auditors and the audit committee is ineffective from external auditor’s perception. The study also found that audit committees do not support external auditor when disagreements arise between auditors and their client management on accounting treatments. The qualitative interviews confirmed the quantitative results and revealed several explanations among which: 1) lack of qualified directors, 2) lack of a clear policy in selecting board members, 3) meetings with auditors are routinely held, and 4) insufficient oversight by the securities commission. The interviews also revealed that the recent version of Jordanian corporate governance has two potential factors have been viewed to improve the effectiveness of the communication process that are, the appointment of a ‘governance liaison officer’ who, among other responsibilities, supervise and document audit committee meetings with the auditor, and the use of cumulative voting technique in selecting board members. The findings of the study could be beneficial for regulators by ensuring the best implementation of cumulative voting to increase the representation of qualified members so that the communication process will be greatly enhanced.
Highlights
The recent version of the International Standard on Auditing No 260 (Communications with those charged with governance) became valid for periods ending on or after December 15, 2016
The Association of International Certified Professional Accountants (AICPA) standard SAS No 114 “The Auditor‟s Communication With Those Charged With Governance” superseded SAS 61 “Communication with Audit Committees”, the purpose of rewording the title of the standard from the audit committee to those charged with governance is to highlight auditor‟s responsibility of communicating with those who have the ultimate responsibility of overseeing entity‟s activity and to increase the scope of the communication process (Sertima, 2008), while the Public Company Accounting Oversight Board (PCAOB)‟s version of the same standard still indicates the audit committee as the governing body that auditors should communicate with
An important theme emerged from their responses which has positively enhanced entity‟s compliance with corporate governance instruction is the new requirement of recent Jordanian corporate governance instruction to appoint a “Governance Liaison Officer”, because the governance liaison officer coordinates with the Jordanian Securities Exchange regarding company's governance applications
Summary
The recent version of the International Standard on Auditing No 260 (Communications with those charged with governance) became valid for periods ending on or after December 15, 2016. The ISA 260 “deals with the auditor’s responsibility to communicate with those charged with governance in an audit of financial statements ... In order to ensure the highest level of effective communication between auditors and those charged with the company governance, it is important that members of board and the audit committee have sufficient knowledge about the applications of the IFRS because qualified audit committees are viewed as integral to the audit process and provide a great contribution to audit quality (CPAB, 2013). Potential disagreements between independent auditor and the company management arise especially on difficult, subjective, and complex accounting policies and estimates. Much responsibilities have been placed on the vital role of the independent auditor, as the shareholder‟s agent, in securing financial reporting system (Rahim, Johari, & Takril, 2015)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
