Nature of Auditing and the Public Accounting Profession

Topics: Financial audit, Auditing, Audit Pages: 4 (1155 words) Published: December 3, 2013

Nature of Auditing and the Public Accounting Profession

1. Auditing neither creates goods nor adds utility to existing goods and therefore does not add value to business. Auditing exists only because it has been legally mandated.

Auditing exists because it is needed by the company. It is beneficial to users who need assurance if their financial statements reflect economic conditions that occurred in a period. Without reliable information, companies might make less effective decisions which are risky for the value of business. It may neither create goods nor add utility to goods but it adds value to business because it is a source of information for a business’ decisions.

2. The failure of the public accounting profession to warn us of the problems that existed in the economy is an example of a profession not adding utility to society.

Accounting records, classifies, and summarizes economic events to provide financial information for decision making. It does not study the problems in the economy but it helps management to make effective decisions despite economic problems. That way, accounting profession is an added utility to society.

3. The only reason I would hire an auditor is with the expectation that the auditor search for and find any fraud that might exist within my company. Searching for fraud should be the primary focus of an audit.

Fraud involves deception that can result to material misstatements of financial information and is not good for the users and a company’s future. But auditing does not only find frauds existing in a company but it also gives assurance to intended users whether financial statement are reliable, whether the operations are effective and efficient or whether the entity adheres to government laws and regulations. These assurances are relevant to the decision makers of a company.

4. Auditors cannot legitimately serve the ‘user’ public because they are effectively hired and fired by the management of the...
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