MIDLANDS STATE UNIVERSITY
FACULTY OF COMMERCE
DEPARTMENT OF ACCOUNTING
Name Faith Mutero
Registration Number R102771P
Duration of Program August 2010- June 2014
Mode of Entry Conventional (CDP)
Mobile Number 0775 985 296 OR 0739523386
The Effects of a Long term Auditor- Client Relationship on the Quality on an Audit.Case study of AMG Global Masvingo.
This chapter relates background regarding the insight of the organization under review and the problem. Subsequent sections state the statement of the problem, main topic, sub research questions, research objectives and significance of the research. The chapter also examines delimitation and limitations of the study. Definition of technical terms are given at the end of the chapter.
1.1Background of the study
Marx ,B etail(2004) asserts that the audit quality is the basis of the credibility of the financial statements.According to De Angelo (1991) audit quality depends on the probability of auditor s ‘discovery of the unbiased truthful report of material errors, emission and misrepresentations from the clients’ financial statements. This ability of a truthful, unbiased report depends on the auditor s' professional conduct with the client, which are based on the objectivity of the auditor, such as professionalism and conflict of interest says Adenyi S and Mieseigha E.G (2013).
AMG Global Chartered Accountancy (Zimbabwe)is a professional accounting firm which provides business and advisory services.Central to the firm s' growth is its emphasis on client relationship management and its ability to combine business knowledge, technical skills and commitment to deliver auditing and business advisory services.The chief operations partner Mr Wesley Sibanda highlighted that the firm implements the long- term relationship between auditor and client in the minutes of the meeting in 28February 2013.
The firm has always implemented the long-term auditor -client relationship over the past years.The audit firm can stay with an organistation for 10 years.For example CARITAS ,MURRA and RUDO has been audited by the firm since 2005.Accordance to the adminstrator of AMG Masvingo Wadzanai Mudarikwa(2012), the term of the auditor-client relationship depends on the client since the client is the one who appoints the auditors.Hence the firm can stay with the same client as long as the client appoints them.ISA
There are arguments as to the implementation of this policy. Thus, according to Carcello and Nagy (2004);Mansi ,Maxwell and Miller (2004), one reason is that the long term relationship between the auditor and client would make the auditor familiar with the client s' reporting issues and its operations thus enhancing the audit quality. Another reason is that in a short-term auditor - client...