Premium Essay

Discuss Whether the Current International Regulatory Environment for the Auditing Profession Is Robust Enough to Ensure That the External Auditors of Listed Companies Provide Reports to Owners and Investors Which Are

In: Business and Management

Submitted By daveda69rave
Words 2816
Pages 12
Discuss whether the current international regulatory environment for the auditing profession is robust enough to ensure that the external auditors of listed companies provide reports to owners and investors which are sufficiently independent to serve the public interest.

Introduction
As we will discover, the topic posed above is a complex one, which has many arguments both in favour and against the stability of the present regulatory environment in ensuring that the audits which auditors produce are indeed impartial enough to satisfy the public interest. We will first proceed in identifying the term “public interest” in light of the accounting and auditing profession. From this will be an explanation of what is the current regulatory environment, which will then lead us to arguments for and against auditors retaining their independence. Relevant sources will be used, including some concerning current thinking on the matter. From this a suitable conclusion can be made.
What is meant by “the public interest” in relation to the (accounting and) audit profession?
The International Federation of Accountants (IFAC 2010) soundly defines the public interest as any individual or entity which is affected by the work of the accountancy profession: in other words, society as a whole. What is expected of the accountancy profession in relation to the public is the safeguarding of particular interests. These interests may consist of providing accurate financial information, ensuring it is of a uniform standard, organizational success and so on.
Thomadakis (2009) has a similar view in that the work of accountants needs to be both precise, and comparable in order to maintain and develop a robust economy. Due to the way in which statements are drawn up in one organization, is uniform in others, highly increases the need for precision and comparability to be of a reliable…...

Similar Documents

Premium Essay

Auditing and Assurance Services, 14th Edition Textbook

...an audit report Perform additional tests for presentation and disclosure Accumulate final evidence Evaluate results Issue audit report Communicate with audit committee and management *The extent of testing of controls is determined by planned reliance on controls. For public companies required to have an audit of internal control, testing must be sufficient to issue an opinion on internal control over financial reporting. FOURTEENTH EDITION AUDITING AND ASSURANCE SERVICES AN INTEGRATED APPROACH Includes coverage of international standards and global auditing issues, in addition to coverage of PCAOB Auditing Standards, the risk assessment SASs, the Sarbanes–Oxley Act, and Section 404 audits. ALVIN A. ARENS Apago PDF Enhancer PricewaterhouseCoopers Emeritus Professor Michigan State University RANDAL J. ELDER Syracuse University MARK S. BEASLEY North Carolina State University Deloitte Professor of Enterprise Risk Management Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Library of Congress Cataloging-in-Publication Information is available. Arens, Alvin A. Auditing and assurance services: an integrated approach/ Alvin A. Arens, Randal J. Elder, Mark S. Beasley.—14th ed. p. cm. Includes index. ISBN-13: 978-0-13-257595-9 ISBN-10: 0-13-257595-7 1. Auditing. I.......

Words: 481694 - Pages: 1927

Premium Essay

Auditing

...Introduction The purpose of auditing is increasing the confidence of people who want to do investment. In order to check the financial statement of listed companies, auditing become more and more important in the society. The people cannot know more the situation about listed companies, so they use auditors’ report to think their investment. However, with more and more scandals about auditing, many people think whether external auditors’ reports provide information to investor that serves the public interest under the current regulatory environment. The public interest First, it is important to know what the public interest is. In order to know the public interest better, we can understand it separately. The public represents social that is abstract concept. It conflicts the private that is specific and certainly. Social is universality and uncertainty. Its function is adjective interest. The International Federation of Accountants (IFAC) defines the public interest as ” The net benefits derived for, and procedural rigor employed on behalf of, all society in relation to any action, decision or policy.” It means that everyone in the society may obtain the interest from all society in relation to any action, decision or policy. The auditing profession is relation to the benefit to the society. The public interest from auditing profession is like the responsibility of this profession. This interest is not direct interest, but the auditors will use their behavior to show......

Words: 2169 - Pages: 9

Premium Essay

Auditing Cases

...accounting fraud and auditor legal liability c a S eS inc lu de d in t hiS Se ction 4 89 99 4.1 Enron Corporation and Andersen, LLP Analyzing the Fall of Two Giants . . . . . . . . . . . 4.2 Comptronix Corporation 4.3 Cendant Corporation . . . . . . . . . . . . . . . . . . . . . . Identifying Inherent Risk and Control Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . 111 119 127 137 Assessing the Control Environment and Evaluating Risk of Financial Statement Fraud . . . . . . . . . . . . . . . . . . . . . . 4.4 Waste Management, Inc. 4.5 Xerox Corporation 4.6 Phar-Mor, Inc. Manipulating Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluating Risk of Financial Statement Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting Fraud, Litigation, and Auditor Liability instructor resource Manual — do not coPy or redistribute instructor resource Manual — do not coPy or redistribute enron corporation and andersen, llP analyzing the fall of two giants inS tr uc t ional o b je c t ive S [1] c a s e 4.1 Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt [2] [3] To help students understand what happened at Enron Corporation and how Andersen’s involvement with Enron led to the accounting firm’s downfall. To enhance students’ appreciation of the importance of understanding an audit client’s core business strategies. To develop......

Words: 33542 - Pages: 135

Premium Essay

Enhanced Auditor Reports

...America to engage in dialogue on international developments. At last year’s conference,I noted a number of important challenges in financial reporting and auditing, and in the surrounding environment. For example, today’s financial reporting involves more complexity, more areas of judgment, and more qualitative disclosures; and users have higher expectations than ever before, with many saying “We want to hear more.” Perhaps most importantly, the global financial crisis has triggered questions concerning the quality of audits, their effectiveness, and the role of professional judgment and skepticism – which have given way to fundamental questions to the profession about relevance and trust. So why change the auditor’s report now? What we learned from research is a positive message: the auditor’s opinion is valued, and users want to hear more from the auditor – more pertinent, and more tailored, information about the specific audit performed on an entity’s financial statements. There is symbolic value in the current report, but little communicative value – and users see the potential for the auditor to provide more value and more transparency. So, now is the time to lay the foundation for the auditor’s report of the future. The Beginning of a New Era I am pleased – indeed proud – to announce that in July the IAASB published its Exposure Draft “Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs).” The IAASB......

Words: 8489 - Pages: 34

Premium Essay

The Factors Which Changed Auditing

...com). There is no doubt that the world has changed over time physically, economically, and culturally. As the world has evolved, so has business, and as business has evolved so has auditing. The concept of auditing is as old as civilization. The need for a knowledgeable, external, third person to verify transactions or accounts and detect fraud has been present since the advent of trade and accounting. Thus the goal of auditing, in this sense, has not changed since. Teck-Heang Lee observed that “auditing serves as a mechanism to monitor conduct and performance, and to secure and enforce accountability (Lee 2008). All in all, an audit function plays a crucial role in maintain welfare and stability in society.” However, what has changed is how the roles and responsibilities of auditors have changed to reflect the needs of the business environment of the time. As such, auditors and the auditing profession have always played a very important role in business and, more recently, in society in general. As business in today’s world becomes more dynamic, accounting (and therefore by extension auditing) must also evolve to become more dynamic. The evolution of auditing is a complicated history that has always been changing through historical events. This can be seen in the shift in the role of external auditors from a cyclical audit approach to now more of a top-down risk-based continuous audit. The factors that have played a major role in this shift of role and responsibilities are......

Words: 5760 - Pages: 24

Premium Essay

Advanced Auditing

...The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0268-6902.htm The changing role of the auditors R. Jayalakshmy, A. Seetharaman and Tan Wei Khong Faculty of Management, Multimedia University, Cyber Jaya, Malaysia Abstract Purpose – To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity. Design/methodology/approach – A wide range of articles and journals published in international journals as well as local journals has been reviewed. The areas covered include audit fraud, true and fair view interpretation, auditor independence and role of internal auditors. Further, ideas have also been obtained from critical write-ups in the business magazines on the fall of multinationals. Findings – A wide range of interpretation has been given by various groups of people on their understanding of the phrase “true and fair”. This has created great confusion as to the interpretation of the audit reports. This has been proven by the fall of many multinationals and the audit pioneers, Andersens. This is one of the causes of audit fraud and it is also seen that as the auditors face an enormous challenge as they enter the twenty-first century, they should be willing to change their attitudes towards their clients.......

Words: 12579 - Pages: 51

Premium Essay

External Auditors Do Not Rely on Internal Auditors as Much as They Could – Why?

...External auditors do not rely on internal auditors as much as they could – why? How could this reliance be improved? Presented By Mingdi Deng Shirene Horner Yueyang Shi Trevor Stewart Jingtao Wang CONTENTS                                                                                                            PAGE ABSTRACT 3 1. INTRODUCTION 3 2. REASONS 3 2.1 INTERNAL AUDITOR ROLES 3 2.2 THE REPORTING AND OBJECTIVITY RELATIONSHIP OF THE INTERNAL AUDITOR 4 3. COLLABORATION IN PRACTICE 5    3.1 COMMUNICATION AND COOPERATION 5 3.2 PROFESSIONAL STANDARDS 5 3.3 RECORDING AND TESTING ACCOUNTING SYSTEMS 6 3.4 SUBSTANTIVE TESTS 6 4. CONSEQUENCES OF INFLUENCE                            7 5. RELIANCE IMPROVEMENTS                                      8 5.1 ATTEMPTS FOR IMPROVEMENT 8 5.2 INCREASE THE EFFICIENCY AND COMMUNICATION METHOD FOR INTERNAL AUDITORS AND EXTERNAL AUDITORS 8 5.3 FURTHER EDUCATION......

Words: 4113 - Pages: 17

Premium Essay

Auditing Cases

...Auditing Cases instructor resource Manual f our th e d itio n Mark S. Beasley Frank A. Buckless Steven M. Glover Douglas F. Prawitt do not coPy or redistribute Prentice hall Upper Saddle River, New Jersey ta b l e s e ct ion o f co n t e n t s 1 2 client acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . S o l u tionS inc lu de d in t h iS Section 1.1 Ocean Manufacturing, Inc. 3 The New Client Acceptance Decision s e ct ion Understanding the Client’s Business and assessing risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 S o l u tionS inc lu de d in t h iS Section 2.1 Your1040Return.com Evaluating eBusiness Revenue Recognition, Information Privacy, and Electronic Evidence Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.2 2.3 2.4 Dell Computer Corporation Evaluation of Client Business Risk Flash Technologies, Inc. Asher Farms Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Risk Analysis and Resolution of Client Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Understanding of Client’s Business Environment s e ct ion 3 Professional and ethical issues . . . . . . . . . . . . . . . . . . . . . . . 59 S o l u tio nS inc lu de d in t h iS Section 3.1 3.2 3.3 3.4 3.5 A Day in the Life of Brent Dorsey Staff Auditor Professional Pressures Nathan Johnson’s Rental Car Reimbursement Solving Ethical......

Words: 162000 - Pages: 648

Premium Essay

Contemporary Auditing

...or your own materials you would like to integrate into your casebook? Q Would you like to integrate a case that was in a previous edition of Knapp’s Contemporary Auditing? Q Q Would you be interested in promoting your department or school on the cover? Q Would you like to use a few of our auditing cases as a supplement to another text you are using? Q Through Cengage Learning’s Make It Yours, you can create a quality auditing text that is tailored to your course—simply, quickly, and affordably. Get Started! Visit www.cengage.com/custom/makeityours/knapp to make your selections. To create your customized casebook at the website above, simply check the cases you want to include, indicate if there are other course materials you would like to add, and click “submit.” A Custom Solutions editor will contact you to discuss the options you have selected and to confirm your order. This page intentionally left blank CONTEMPORARY R REAL ISSUES & CASES AUDITING MICHAEL C. KNAPP EIGHTH EDITION P Prefer to use pen and paper? No problem! Fill out questions 1-4 and fax this form to 1.800.270.3310. A Custom Solutions editor will contact you to discuss the options you have selected and to confirm your order. 1 ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ Which of the following cases would you like to include? Section 3: Internal Control Issues ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ ❍ Section 1: Comprehensive Cases 1.1 1.2......

Words: 286111 - Pages: 1145

Premium Essay

Auditing

... FIFTEENTH EDITION AUDITING AND ASSURANCE SERVICES AN INTEGRATED APPROACH Includes coverage of international standards and global auditing issues, in addition to coverage of the AICPA Clarity Project, PCAOB Auditing Standards, the Sarbanes–Oxley Act, and Section 404 audits. A LV I N A . A R E N S Former PricewaterhouseCoopers Emeritus Professor Michigan State University R ANDAL J. ELDER Syracuse University Professor and Senior Associate Dean MARK S. BEASLEY North Carolina State University Deloitte Professor of Enterprise Risk Management PLUS NEW CONTRIBUTING AUTHOR CHRIS HOGAN Michigan State University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista Acquisitions Editor: Victoria Warneck Director of Editorial Services: Ashley Santora Editorial Project Manager: Christina Rumbaugh Editorial Assistant: Jane Avery Director of Marketing: Maggie Moylan Leen Marketing Assistant: Kimberly Lovato Managing Editor, Production: Jeff Holcomb Senior Production Project Manager: Roberta Sherman Manufacturing Buyer: Carol Melville Art Director: Anthony Gemmellaro Interior Design: Lynne Wood Cover Design: Anthony Gemmellaro Cover Photo: Ben Bryant / Shutterstock.com Composition: Lynne Wood Printer/Binder: Edwards Brothers Malloy Typeface: 11/12.5 Minion......

Words: 485556 - Pages: 1943

Premium Essay

Auditing

...Regulation, Corporate Governance, and Audit Quality 1. The auditor is not responsible for the presentation of financial statements; therefore, the auditor has no responsibility for fraud in the financial statements. FALSE 2. An example of fraudulent financial reporting is the CFO intentionally overstating sales to boost profits. TRUE 3. The auditor is responsible for actively considering fraud risks in order to obtain reasonable assurance that the financial statements are free of material fraud. TRUE 4. Auditors need to consider fraud arising from misappropriation of assets and fraudulent financial reporting. TRUE 5. Fraud is an intentional act involving the use of deception that results in a material misstatement of the financial statements. TRUE 6. An example of fraudulent financial reporting is the treasurer's diversion of hundreds of thousands of dollars into a personal money market account. FALSE 7. BruceCo. has accounted for the revenue of Jiffy Mac, Inc., one of its suppliers as though it were its subsidiary. BruceCo. has probably committed fraud because of its misapplication of consolidation principles. TRUE 8. Consideration of fraud in financial statement audits is a relatively new concept derived originally from the Sarbanes-Oxley Act. FALSE 9. The most important lesson to be learned from The Great Salad Oil Swindle is that auditors can commit fraud by falsely including inventory that does not......

Words: 6460 - Pages: 26

Premium Essay

Auditing Eilifsen Solutions Manual

...STATEMENT AUDITING Answers to Review Questions 1-1 The study of auditing is more conceptual in nature compared to other accounting courses. Rather than focusing on learning the rules, techniques, and computations required to prepare financial statements, auditing emphasizes learning a framework of analytical and logical skills to evaluate the relevance and reliability of the systems and processes responsible for financial information, as well as the information itself. To be successful, students must learn the framework and then learn to use logic and common sense in applying auditing concepts to various circumstances and situations. Understanding auditing can improve the decision making ability of consultants, business managers, and accountants by providing a framework for evaluating the usefulness and reliability of information. 1-2 There is a demand for auditing in a free-market economy because the agency relationship between an absentee owner and a manager produces a natural conflict of interest due to the information asymmetry that exists between the owner and manager. As a result, the agent agrees to be monitored as part of his/her employment contract. Auditing appears to be a cost-effective form of monitoring. The empirical evidence suggests auditing was demanded prior to government regulation such as statutory audit requirements. Additionally, many private companies and other entities not subject to government auditing regulations also demand......

Words: 26005 - Pages: 105

Premium Essay

Principles of Auditing

...theories of audit services including agency theory. 2. Understand drivers for audit regulation. 3. Understand the role of public oversight. 4. Distinguish between different audit firms. 5. Identify some current developments in the audit market. 6. Portray the series of industry codes of conduct and guidance 2.2 Introduction The emergence of today’s auditors happened during the Industrial Revolution that started in Great Britain around 1780. This revolution led to the emergence of large industrial companies with complex bureaucratic structures and, gradually, the need to look for external funds in order to finance further expansion: the separation between capital provision and management. Both developments resulted in demand for the services of specialists in bookkeeping and in auditing internal and external financial representations. The institutionalization of the audit profession was then merely a matter of time. Management Controls Operations and Communications Management has control over the accounting systems and internal controls of the enterprises that auditors audit. Management is not only responsible for the financial and internal control reports to investors, but also has the authority to determine the precise nature of the representations that go into those reports. However, management can scarcely be expected to take an impartial view of this process. Communications to Stakeholders – the Financial Statements The financial statements measure the......

Words: 13100 - Pages: 53

Premium Essay

Auditing

...business and other organisations has created the need for a specialist in various business controls: the internal auditor. We can understand better the nature of internal auditing today if we know something about the changing conditions in the past and the different needs these changes created. What is the earliest form of internal auditing and how did it come into existence? How has internal auditing responded to changing needs? As the operations of an organisation become more voluminous and complex, it is no longer practicable for the owner or top manager to have enough contact with all operations to satisfactorily review the effectiveness of performance. These responsibilities need to be delegated. The Development of the Profession of Internal Auditing Internal auditing has evolved from accounting-oriented to a management-oriented profession. At one time, internal auditing functioned as a junior to the independent accounting profession, and attesting to the accuracy of financial matters was the profession's main concern. Now internal auditing has established itself with a far broader focus. Modern internal auditing provides services that include the examination and appraisal of controls, performance, risk and governance throughout public and private entities. Financial matters represent only one aspect of the purview of internal auditing. Requirement to have Internal Audit Activity In January 2004, the US Securities and Exchange Commission......

Words: 6115 - Pages: 25

Premium Essay

Auditing

...AUDITING DEFINITION Auditing can be defined as an independent examination of the books of accounts and vouchers of a business with a view of forming an opinion as to whether these have been kept properly according to the Companies Act and as to whether the statement drawn there from portrays a true and fair view of the company’s state of affairs at a given date. The above definition can be broken down as follows: i. Independent examination: this is conducted by a qualified accountant qualified according to the Companies Act. The qualified accountant must be independent of all parties with an interest in the company e.g. management, directors and third parties. His independence is very crucial because; a. This independence is a requirement of the Companies Act, Cap 486. b. The independence is a requirement of the Institute of Certified Public Accountants of Kenya (ICPAK) professional body for ethical reasons. ii. Books of accounts: according to the Companies Act, Cap 486, of the laws of Kenya, a limited company must maintain: a. Cashbook b. Asset register c. Ledgers d. Shareholders’ register The first three books are statutory books of accounts that must be kept by companies at their registered offices. iii. Vouchers: these are documents in support of transactions in the books of account e.g. an agreement, a receipt, invoice, debit and credit notes etc. the auditor will check a voucher for: a.......

Words: 40889 - Pages: 164