Reflection of the external auditor's assessment of the continuity of private banks by adopting the Sherrod model on audit acceptance

Abstract

The continuity of an economic entity is an important accounting assumption. Given its importance to many users of financial reports, who find it difficult to predict the entity's continuity, professional bodies concerned with auditing have required external auditors to conduct a continuity assessment. The main aspect of the research problem is to formulate the following question: What are the indicators based on the Sherrod model that the auditor can use to examine and evaluate the continuity of Iraqi private banks? What procedures will be adopted for the assessment process? The research is based on the following hypothesis: "The auditor's use of Sherrod model indicators helps in assessing the continuity of some Iraqi banks, which contributes to the decision to accept the audit and the design of audit procedures that enhance the examination process." The research aimed to clarify the role of the auditor in developing procedures based on calculating indicators based on the Sherrod model, to support the planned audit procedures. The researcher prepared the practical aspect of the research by conducting an analytical study on a number of private Iraqi banks (Iraqi Credit Bank, Middle East Investment Bank, Kurdistan International Islamic Bank for Investment and Development), adopting a model designed for the purpose of analyzing continuity and making the decision to accept or reject the entity under audit. The study concluded that management is responsible for assessing continuity, while the auditor's role is to assess the validity of the assessment conducted by management through a set of procedures in the event of doubt threatening continuity, based on indicators included in the Sherrod model, in addition to gathering sufficient evidence regarding continuity to support his opinion.