In early 2000s, the world was shocked by series of disclosure of financial fraudinvolving corporate giantssuch as Enron, WorldCom, Tyco, Lehman Brothers, Stanford International Bankthat have ledto the financial collapse in 2018. The more recent issues affecting Mitsubishi Materials, Kobe Steel,Wells Fargoand Volkswagen, among others, have raised questions about whether both internal and external auditors have been sufficiently sceptical in doing their work. The concerns of the public, some regulators, and other stakeholders have been highlighted in the media and continuously in debate.

Requirement:

a)What are the elementsthat critical to internal auditors' performance and subsequently, corporate financial information quality?

b)PCAOB identifies that inherent conditions in audit environment can create incentives and pressures that impede external auditors to successfully exercise professional scepticism. Discuss these potential incentives and pressures.