Business Law Essay Questions and Answers - Example
Most students are usually not sure of what to write in their business law essays or assignments. However, with the right guidance, any student can handle any business law essay questions by answering based on the requirements of the assignment.
Below is an example of a question and answer to prepare you for the assignments that you may come across in the future. Also, remember that we have a team of business law essay writers who are always ready and free to assist in writing a custom essays or answers to your business law related assignments.
Sample Business Law Question
Listed below are the requirements to successfully complete the project:
Sarbanes-Oxley Act was enacted in 2002 and there was new rule put in place for Auditor Independence. This requires External Auditor to be independent from the client. Similarly the Institute on Internal Auditors (IIA) provides guidance for Internal Auditors to be Independent and Objective – Standard 1100 – Independence and Objectivity.
As a student of audit and as future accountants it is very crucial to understand the difference between the two types of Independence.
• Provide detailed analysis of Independence according the Sarbanes-Oxley Act (SOX, 2002).
• Provide detailed analysis of IIA Standard – 1100.
• Compare the two standards.
• In your words how do you think Internal Auditors can maintain Objectivity and Independence in their report?
• Why is it important for Internal Auditors to be Independent?
Students are required to follow the APA style format to write their reports. It is required that the students use citation, in accounting citations play an important role. Hence, citations are required to successfully complete this project. The reports should be minimum 3 pages, typed and double spaced.
HOW IT WORKS
1. SUBMIT YOUR
2. INCLUDE YOUR
3. START WORKING
Business Law Question Answer
The Sarbanes-Oxley act of 2002 has a rule regarding auditor independence, which requires that external auditors perform their duties in a free and objective manner. The parties that have interests in the organization being audited should not influence the audit process. Moreover, the concept of independence also requires auditors to be independent from parties affected by the results of the audit process. Therefore, some of the provisions of the Sarbanes-Oxley Act and IIA Standard – 1100 provide guidelines regarding audit independence.
In 2002, the Sarbanes-Oxley Act was enacted into law with the objective of protecting investors from fraudulent and falsified financial reporting by companies. The law introduced strict reforms and imposed tough penalties for those who broke the securities regulations. An increase in fraudulent reporting by corporations, such as in the Enron scandal, led to the enactment of the act (ACCA Global, n.d). One of the notable elements introduced in the act is the concept of independence of external auditors from their clients. According to the act, it is imperative for a corporation’s audit committee to examine the possibility of a relationship between an external auditor and his or her client. Aspects such as mutual and conflicting interests may affect the independence of an external auditor since it places them in a position to audit their own work (SEC, 2017). Moreover, because of such conflicts and interests, the auditors act as the management or employees of the client, while the audit process places them as their client’s advocates, which ultimately affects the integrity of the entire audit process, including the outcomes (Chu & Hsu, 2018).
Additionally, to safeguard audit independence, the act also prohibits some non-audit services that can affect external auditors’ independence. These services include legal and expert services, human resource, bookkeeping, management, and the design and implementation of financial information systems. External auditors should not provide professional services to their clients in any of these areas. Additionally, the restrictions also apply to the audit clients ‘affiliates (Đorđević & Đukić, 2017). Another provision of the act is the prohibition of certain types of relationships between auditors and audit clients. Among the most notable are employment relationships. The act prohibits a client from employing a person formerly employed by the external auditor before a year ends. The requirement especially affects individuals working in financial oversight roles. At the same time, the act also restricts direct and indirect material business and financial relationships between an auditor and the client (SEC, 2017). Such extends to situations where firms may want to pay auditors a commission or a contingency for the rendered services. Therefore, the act defines the various ways through which auditors can maintain their independence.
IIA Standard – 1100
Similarly, Standard 1100 addresses the issue of audit independence, although from a different angle since it focuses on internal auditors. It requires that these auditors are objective and independent when undertaking their duties. As per the requirements of the standard, an organization’s chief internal auditor needs to implement various measures that demonstrate and assure that the threats to the internal audit team are effectively and sufficiently managed (ACCA Global, n.d). Furthermore, it also stipulates that the internal audit functions work should be objective.
Based on Standard 1100, audit independence refers to the internal audit functions freedom from any conditions that can threaten its ability to undertake its duties in an unbiased manner. Accordingly, it is imperative for the chief internal auditor to have unrestricted, direct access to senior management of an organization and its board of directors (ACCA Global, n.d). Such is essential for the internal auditors in that they can raise any issues of concerns, thus enabling them to work objectively and in an unbiased manner. Besides, dual reporting is also essential to address any threats to auditor independence at various organizational levels.
In addition, another key consideration in Standard 1100 is the need for the internal audit function to well-positioned with the organizational hierarchy, which should incorporate a direct reporting line to the chief executive officer of an organization, or to a member of the executive team, which assists in promoting the ability of the internal audit function to operate independently (Chu & Hsu, 2018). At the same time, it is imperative for the board of directors to be involved in the recruitment process internal audits, their performance reviews, remuneration of the chief audit officer, and his or her removal. At the same time, the chief audit officer should have the capacity to contact the chairperson of the board directly (Đorđević & Đukić, 2017). Therefore, these requirements assist in addressing some of the concerns associated with the independence of the internal auditors.
Maintaining Objectivity and Independence in Reporting
Internal auditors can maintain independence and objectivity in their reporting by being unbiased. Such includes ensuring that the interests of parties who may be adversely affected by the outcomes of the audit process do not influence their reporting. Besides, to remain objective in their reporting, the internal auditors should not comprise on the quality of the audit process and reporting. Such requires maintaining professionalism in every step of the audit process and adhering to professional standards and regulations related to the internal audit function. Besides, it is also imperative for the judgments of the internal auditors not to be affected by the opinions of people not involved in the audit process. In addition, to maintain independence, internal auditors should adhere to professional guidelines during the audit process and when reporting, while also ensuring that internal and external parties do not influence the outcomes of an audit.
Importance of the Independence of Internal Auditors
It is essential for internal auditors to remain independent to protect the interests of investors and other key stakeholders by providing reliable and accurate corporate disclosures that are made using the relevant guidelines, while adhering to the applicable laws. An independent internal audit function also enhances investor confidence (ACCA Global, n.d). Moreover, by being independent, internal auditors are able to execute their duties in an objective and professional manner. These duties include IT and business process audits, risk management audit, and compliance with the applicable statutes and laws. These audit services are essential for the survival of a corporation. It also involves the audit of the internal controls of an organization and making the relevant recommendations, which safeguards the interest of the investors and other key stakeholders (Đorđević & Đukić, 2017).
ACCA Global. (n.d.). Standard 1100 Independence and objectivity | ACCA Global. Www.Accaglobal.Com. Retrieved October 22, 2020, from https://www.accaglobal.com/uk/en/member/sectors/internal-audit/learn/standard-1100-independence-and-objectivity.html
Chu, B., & Hsu, Y. (2018). Non-audit services and audit quality — the effect of Sarbanes-Oxley Act. Asia Pacific Management Review, 23(3), 201–208. https://doi.org/10.1016/j.apmrv.2017.07.004
Đorđević, M., & Đukić, T. (2017). Independence and objectivity of internal auditors as determinants of their effectiveness. Facta Universitatis, Series: Economics and Organization, 231. https://doi.org/10.22190/fueo1703231d
SEC. (2017, May 12). SEC.gov | Audit Committees and Auditor Independence. Sec.Gov. https://www.sec.gov/info/accountants/audit042707.htm