One of the major scandals that the United States has witnessed with respect to corporate involves the Enron scandal and as such, a number of measures have been put in place to build trust in corporate affairs. According to Gray and Manson (2011; 22) auditing has been used for a number of years to provide surety for honest dealing in company affairs but this measure falls short taking into consideration that auditors have been found to be colluding with business leaders to perpetrate fraudulent acts. Presently, besides auditing, assurance engagement has been made part of business operations in order to increase confidence of the stakeholders in the business. Assurance Engagement Assurance engagement refers to an engagement whereby an assurance practitioner explains a view aimed at enhancing that the degree of confidence of the intended consumers against the evaluation of the subject matter relative to the set criteria. Assurance refers to an individual or an organization charged with the responsibility of providing assurance service whether in public practice, public sector, commerce, or industry (Vallabhaneni 2005, 378). Assurance engagement may be carried out to enhance the confidence of the consumers rather than the responsible parties about the presented information. For instance, consumers of the financial reports of an organization range firm government, shareholders, credit institutions, potential investors, suppliers and some extent employees rather than board and top executives who were in charge of the operations of the organization. This means that assurance will only be important to the stakeholders of the organization rather than the board and management who were responsible for overseeing effective performance of the organization. In most cases, the responsible parties often do evaluation of the subject matter. Assurance to the stakeholders that the organization affairs are conducted as per the requirements of the law is much more important to the stakeholders especially investors than the performance of the organization. Investors want to see that businesses are operated honestly, so that they can earn good returns from their investment in terms of dividends or capital growth and need can only be satisfied through acceptable corporate governance. Vallabhaneni (2005; 213) states that stakeholders to the company must be assured that the reported financial statements reflect a true and fair view of the company affairs and above all, they are free from Errors, Fraud, and Irregularities (EFI). According to Cosserat and Rodda (2009; 383) the stakeholders also want surety that the organizations internal control systems are effective and capable of guarding the company against Errors, Fraud, and Irregularities. Finally, the stakeholders both internal and external need assurance about the governance and management of the organization affairs. It is noteworthy that a number of sources are available for assurance in the organization, which include both internal and external and it is in the best interest that an organization makes use of the available sources of assurance to inspire confidence of various stakeholders in the business. Audit Committee The board is expected to establish an Audit Committee
Audit and Assurance Instructor Institution Date Introduction The present day global economy calls for any business organization to build trust in the business and above all institute trustworthy advisors before creating value. This calls for responsible and strong corporate governance that is acceptable in the business environment and congruent to the guidelines of the regulatory bodies such as the Financial Reporting Council (FRC)…
The collection, input, storage, processing and the dissemination of data and information in the organizations database. Increase in the use of information technology in the organization has made the operations and activities in the organization more effective.
The financial crisis started in the year 2007 and spread with intense in 2008 despite of the central banks and regulators effort to calm it down (Merkel, 2012). In early 2009, the global economy was experiencing recession and the only way out was to focus was on preventing the downtown from prolonging to a great depression.
At the turn of 21st century, there happened a number of scandals such as WorldCom, Enron which made people question the integrity of the audit profession. The most respected firm Arthur Anderson, which was the audit firm for Enron, was finished. This led to a stronger demand for supervision of auditing practices.
This calls for future protection of shareholders and brings attention to the significance of audit processes and its final outcome (Vinten, 2004, p. 13). It is necessary to carry out continuous internal audit with the aim of providing shareholders with adequate information about the financial status of the firm.
A clash in the interest happens when an individual’s self-regarding interest disagrees in complying with the individual’s fiduciary responsibilities. It might also take place in an instance when an individual is accountable for discharging two fiduciary responsibilities and the obligations of one comes in the way of others.
In the year 1991, the different principles of IAPC principles were recodified as ‘International Standards on Auditing’ (ISA). In the year 2001, a widespread evaluation regarding the IAPC was commenced and in the year 2002, it was re-established as the IAASB.
There was a vacuum of trust and confidence in the capital markets and everyone started to point fingers at the regulators and those who were associated with the profession of auditing. Some also argued that inherent loop holes that existed in the US GAAP
The audit, which is mandatory and is required as per the legal obligations, is some times referred to as statutory audit. The statutory audit is going through a period of criticism and change. This is partly because of the failure of
Increasing complexities in the business operations and the financial transactions over a period of time underlined the inadequacy of the auditing system, especially after liberalization of the economies and globalization.
The information collected through auditing is essential as it helps an organization in decision making. Shareholders of a company develop confidence when the audit reports are positive and indicate the
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