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The analysis of EC Proposals and the Statutory Audit - Essay Example
Finance & Accounting
Pages 16 (4016 words)
Instructor Date EC Proposals and the Statutory Audit 1.0 Introduction Financial crisis has historically been related to excesses in the financial system and the crisis of 2007 to 2009 has been no different. In fact, Taylor (2008, p. 1) indicates that the crisis which started in 2007 was a result of a housing boom which later went bust and led to a turmoil in major countries across the world…
Blame was levied at rating agencies, directors of companies in the financial system and their regulatory agencies, as well as accounting and auditing professionals. This led to a number of regulatory responses that were aimed at strengthening controls over the operations of financial institutions and enhancing financial reporting. These responses have not only been limited to governments in the countries affected but to various bodies including standard setters for the accounting and auditing profession. Te European Commission (EC) which gives directives to 27 countries, made two proposals that could result in major changes in the auditing statutory audits and the audit of PIEs. They are aimed at the professionals whose opinion adds credibility to financial statements as well as supervisors of PIEs. Additionally, there was the Basle lll Accord which amended the capital requirements for financial institutions. Since then auditors have been required to provide more comfort to investors by carrying out additional procedures that would enhance financial reporting. Audit committees have also been challenged to provide the necessary support to ensure compliance. This paper provides information on the background to the financial crisis and the audited accounts of financial institutions. ...