Critical areas within auditing -An analysis of the Swedish Supervisory Board of Public Accountants disciplinary withdrawals

Abstract

Background and problem: It is pivotal to provide competent auditors for the trade and industry as well as to supervise and assure the quality of the audit profession. The Swedish Supervisory Board of Public Accountants (SSBPA), a governmental authority, was in 1995 assigned the mission to both provide approved and authorized auditors in Sweden and to supervise these. The board has the authority to issue reminders and warnings or withdraw the licenses of auditors if necessary. However, studies reveal that only withdrawal has a major effect on the auditor. To thoroughly explore the frequency of these withdrawals and the reasons for them would therefore be of considerable interest. Aim: The aim of this master thesis is to examine the SSBPA’s investigation of auditors, to be able to identify what areas within auditing that are critical for the auditor when performing an audit. Furthermore, the aim is also to analyze the disciplinary cases resulting in the SSBPA withdrawing the license of the auditor, in order to describe the types of failures that are reported most frequently as well as what types of failures that solely lead to withdrawal. Method: This study was conducted by reviewing 77 disciplinary cases issued by the SSBPA resulting in withdrawal of authorization or approval during 1995-2010. The audit failures found in these cases were sorted into categories representing different areas within the audit process and the professional conduct of the auditor. Thereafter, the empirical result was analyzed based on previous studies and the frame of reference. Results and conclusions: The most frequent type of failure in the 77 disciplinary cases was by far failures regarding Error of judgment or execution when performing the audit. However, the fact that a failure is frequently reported does not mean that it is the most likely cause of withdrawal. This study revealed two additional areas as critical, in terms of solely leading to withdrawal of license. These areas consisted of Failure to cooperate with the SSBPA’s investigation etc. and Unprofessional conduct. Future studies: An interesting point of view would be to thoroughly compare disciplinary cases resulting in withdrawals with cases resulting in warnings, in order to determine the differences in content between these two sanctions. Furthermore, a comparison between sanctions issued by the SSBPA and sanctions issued by similar supervisory authorities abroad may also be of value as it would provide further information regarding supervision and auditing on an international level.