Contemporary Issues in Auditing

Topics: Audit, Balance sheet, Auditing Pages: 8 (2185 words) Published: December 20, 2013


Contemporary Issues in Auditing

Contents

1. INTRODUCTION

Basically the audit was originally described as to ascertaining whether the resource managing party had properly accounted for all receipts and payments on behalf of his principal. Modern audit considers whether all the information provided to the users of accounts are true and fair. Audit is, therefore, an examination of accounting records undertaken with a view to establishing whether they correctly and completely reflect the transactions.

Most importantly, an external audit tests whether or not a company is adhering to professional standards and generally acceptable accounting principles and holds a true and fair view. Auditing is an assurance provided by an independent third party to the Stakeholders of the organization regarding the financial statement. This effort initially focused on to investigate some current issues or problems or otherwise challenges regarding to the field of auditing.

Globalization…Information technology…Volume of transactions…New and more complex laws, regulations and standards governing entities…These few issued are discussed through this paper. The auditing profession is currently experiencing a period of serious chaos. With severe criticisms against auditors and hence it is also fair to know what challenges and issues there are in the profession of auditing. 2. CURRENT ISSUES REGARDING AUDITING

2.1 The expectation gap in auditing

Currently there is a considerable gap between that auditors and the public hold different beliefs about the auditors’ duties and responsibilities. Recently, some well-known corporate collapses and the subsequent implication of the reporting auditors have highlighted the audit expectation gap. So the public misperceptions are a major cause of the legal liability crisis facing by the accounting profession.

2.2 Fraudulent financial reporting and audit failures

Corporate collapses occurred recently which were the results of fraudulent financial reporting, and these resulted in significant losses especially for creditors and serious hardships for the shareholders. Most of these business failures were also seen as audit failures, and the auditing profession stood accused of not performing its ‘watchdog function' properly.

2.3 Newly introduced legislation, regulations and standards that amend frequently

Professional Acts of Auditing provided much stricter requirements regulating registered auditors and audit firms and more stringent reporting requirements for reportable irregularities.

The responses by governments and regulatory bodies to the corporate collapses and audit failures gave rise to various new statutory requirements, regulations and standards with the purpose of strengthening the auditors' independence and improving the quality of their work. All these new requirements were aimed at improving the quality of audits, but they gave rise to increasing costs for the profession of auditing. The new regulations, requirements and increased legal exposure of auditors are also often criticized and blamed for harming the auditing profession's ability to attract and retain staff.

2.4 High Demand for the Audit in Small business

Small businesses have become the core of the dynamic economy today and thy always bring new things to the markets and hence require more investments in their operations. As a consequence of that they must gain the attention and the credibility from the potential investors, having externally audited set of books and an audit opinion stating that the reporting is true and fair makes it easy to obtain funds and because of that reason currently small business are demanding more for the audit service. Therefore the demand for auditing of small businesses has been an upcoming issue for the field of auditing as the methods of auditing small and medium-sized enterprises (SMEs) need to be revised to ensure direct...

References: www.auditingtext.com
http://www.kpmginstitutes.com/financial-reporting-network
http://www.pwc.com/lk/en/services/assurance/internalaudit.jhtml
http://www.slaasmb.org/significant_cases_detected2.html
Dun & Bradstreet, Financial Risk Management2007tata Macgrow-Hill
AlanMillichamp & Jhon Taylor,Auditing,9th edition
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