Accounting Essay

Topics: Financial audit, Auditing, Audit Pages: 5 (1605 words) Published: May 5, 2010
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Over the years, with the corporate development and social or statutes pressure, some concepts and standards related with audit is uncertainly or ambiguous. The obvious question is whether auditors should be blame when they failing to warn investors to ailing firms’ financial problems and risks (McNabb, 2009). In my opinion, auditors should be blame when they did not provide sufficient and useful information to alert to investors. Prior to answer the question, according to the NZICA (2007) required that be a auditor should to compliance with the code of ethics’ five necessary principles, integrity, objectivity and independence, competence, quality performance, and professional behavior. Those five points show auditing is a more complex and harder work than usually work. Auditors have to pay more attention to correspond with the highly criterion. However, in the other side, the expectation gap for audit will emerge between auditors and auditees or others, which can block auditors to research sufficient and useful information (Van Peursem & Pratt, 2006). “The ‘expectation gap’ is an apt description of the diverse perceptions and expectations held by various corporate stakeholders regarding the external audit” (Fran, James, & Gregory, 1999). For this reason, the truth thing is auditors can not always to provide absolute right information to all investors or shareholders, but always provide right information is an aim and goal for auditor. If auditors will not suffer rebuke, someone will pass the buck to “expectation gap”. It will drop the self-regulation or personal liability, and result in useless auditing. Oppositely, blaming can give an impetus to auditors act profession and work hard to overcome bad influences from expectation gap. Background
In order to improving and systematization audit, professional communities establish a few of definitions and standards about audit. As time goes on, more and higher standards or definitions are established to confirming audit independently and professionally. Moreover, in the real life, some major cases indicated what should be done by an audit. ANSI/ ASQC (1986) pointed out auditors should systematic examined people’s acts and decisions for verifying or evaluating and reporting level of compliance to requirements of operational program by independently. According to Kingston Cotton Mill case, auditors have a duty to work hard to perform skillfully, carefully, and cautiously (1896). It still point out when anything excite suspicion, auditors must to probe it to the bottom (Kingston Cotton Mill case, 1896). All above send a concept and trend that people or society hopes auditors perform very profession, systematic, and independently. Therefore, if auditors did not satisfy it, they can not use any excuse to weasel out of his responsibility and should be blame. Audit in agency theory

Agency theory and audit’s role
“Agency theory is part of the positivist group of theories which derives from the financial economics literature” (Michael, 1994). It requires the companies or organizations establish a contract between the real owners of economic entity and managers, the principals and agent, and let managers represent them to control and use their economic resource (Michael, 1994). Currently, more and more companies or organizations have more than one owners, partnership or listed company, so they face a problem about how to resolve separation of ownership and identify owners’ different view or purpose. Moreover, some owners may have not enough skill and experience to manage companies. Agency theory is a useful way to help resolve that problems. However, a new problem that owners how to make sure agent work hard or not harm business benefit present. This is auditors’ role. A serious of examining, evaluating, and researching behaviors will be taken by auditor to disclosure...
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