Audit practitioners have recently initiated substantive changes in the audit approach. It appears to be the strategy that audit firms are moving away from the audit of financial statements and more to the provision of assurances on financial data, systems and controls in those systems. Auditors are focusing on providing 'business assurance' and 'business risk' which gives clients wider assurance than the traditional audit has offered. Auditors are reviewing the business from a process standpoint utilising benchmarking, performance measurements and best control practices as the key criteria. It seems that the audit is moving more to the analysis of business risk and the alignment of the audit much more to the management perspective.
A wide range of risk assessment services is now part of the audit service. The provision of internal audit services is becoming an increasingly larger part of the 'business assurance' service offered by auditors. It seems that the audit is becoming a management consultancy exercise with internal audit, external audit and consultancy assignments being seen as complementary services.
Required
Discuss the implications of the external auditor providing an internal audit service to a client, explaining the current ethical guidance on the provision of other services to clients.
Explain the principal effects of the external auditor providing wider assurance to the client.
Critically evaluate the move by large auditing firms to providing 'business risk and assurance' services rather than the traditional audit assurance for investors and creditors.