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Contemporary issues in accounting and finance
Finance & Accounting
Pages 6 (1506 words)
Contemporary Issues in Accounting and Finance Introduction With the collapse of global corporate giants like WorldCom and Enron, organizations give particular focus to corporate governance principles, which particularly emphasise the importance of statutory auditing.
A recent FEE (Federation of European Accountants) publication states that “an individual’s objectivity must be beyond question when conducting and reporting on a statutory audit” (FEE). This paper will critically evaluate this statement with particular reference given to some fundamental financial/accounting/auditing concepts and external studies. Objectivity of statutory auditors There are many situations where a statutory auditor’s objectivity would be questioned when auditing financial statements of a firm. To illustrate, an auditor faces this challenge while dealing with the valuation of assets. In order to understand this situation clearly, it is necessary to discuss the difference between fair value and historical cost. Under historical cost accounting, assets and liabilities are valued at original acquisition price and any increase or decrease in their market value over the years is not taken into account (Shome 1995, p.135). In contrast, assets and liabilities are valued at the market price in the current date under the fair value accounting method (Wood 2009, p.344). Traditionally, books of accounts were kept at historical costs. ...
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