Auditing

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Recommended: FIVE Objectives of standard and guidelines IN AUDITING

“Auditors are well trained, professional people with a clear financial incentive to regulate their affairs properly so they should be left alone to do this rather than be subject to external regulation".

An auditor conducts an unbiased examination and assessment of the financial statements of a business/organisation. This examination can either be done internally or externally. Auditors are closely monitored and firmly regulated, breaches of rules can result in serve costs. Through government legislation e.g. Companies Act 2004 and the Statutory 2006 the government decides who should oversee and regulate the work of auditors. Furthermore the Financial Reporting Council watches over the audit profession, and works closely with the ICAEW who also regulate the work of auditors. The finest explanation of auditor independence (lack of regulation) can be found in the Statement on Auditing Standards (Paragraph 2, Section 220). The Statement on Auditing Standards conditions the auditor “must be without bias with respect to the client under audit”, adding on it states that “independence does not imply the attitude of a prosecutor but rather a judicial impartiality”. As further high profile business scandals came to light over the past few years, the importance of auditor regulation has significantly grown. There has been an increase in discussion whether auditors should remain free from external regulation or not. Therefore this essay will conclude whether or not auditors should regulate their affairs without external regulation.
Auditor regulation ensures that the fundamental principle of accounting, objectivity and integrity is maintained. Auditors should remain objective when conducting the financial report, failure of being objectiv...

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...bility and reliability of the financial report is crucial as it also directly affects the users of the financial report, such as shareholders. Regulation can ensure that reliability and credibility maintained to high standards. Auditors can fulfil their required job whilst being unregulated, if they remain both professional and ethical. Adding on, external regulation has proved to be faulty at times, which is significant as a lot of time and money is gone into regulating auditors and clients. However it’s extremely difficult to operate without regulation as auditors may work in a bias environment and also may develop a relationship with the client. It’s crucial that auditors remain objective and unbiased, external regulation ensures that auditors are. Therefore auditors shouldn’t be left alone to regulate their own affairs but however be under externally regulation.

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