AUDIT

Auditing Profession and Public Interest



Auditing Profession and Public Interest

Introduction

This paper will discuss the stability of the present regulatory environment in ensuring that the audits, which auditors produce, are indeed impartial enough to satisfy the public interest. We will first proceed in identifying the term “public interest” in light of accounting and auditing profession. From this, we will be explaining the current regulatory environment, which will then lead us to arguments for and against auditors retaining their independence. Relevant sources have been used for completing this assignment.Meaning of “the public interest” in relation to the (accounting and) audit professionThe International Federation of Accountants (IFAC 2010) soundly defines the public interest as any individual or entity, which is affected, by the work of the accountancy profession: in other words, society as a whole. What is expected of the accountancy profession in relation to the public is the safeguarding of interest. These interests may consist of providing accurate financial information, ensuring it is of a uniform standard, organizational success and so on (Vanasco, 1996, pp. 48).Thomadakis (2009) has a similar view in that the work of accountants needs to be both precise, and comparable in order to maintain and develop a robust economy. Due to the way in which statements are drawn up in one organization, is uniform in others, undoubtedly increases the need for precision and comparability to be of a reliable and virtuous nature. This is to enable healthy competition and allow outsiders to compare different organizations, with a standard gauge: it is this which is of public interest. It is the responsibility of auditors to provide a public service in verifying the accounts of organizations: the facilitation of financial markets depends on it (Chen, 2010, pp. 146).Lee (1995) observes that, accountancy was created into a profession, specifically in Scotland in the 19th century, due to selfish economic reasons. They justified that to be made into a single body would better enable them to carry out their effective service in the interests of the public. Now, however, in the modern day, accountants and their respective auditors have been subject to much criticism concerning the public interest or rather a lack of it. The implication seems that perhaps accountants are losing focus on the public interest, the bed-rock of their transformation into a professional body, due to their selfish desire for economic and social benefits (Lee, 1995, pp, 59). Current international regulatory environmentThe repercussions subsequent to the demise of once such huge companies, namely Enron and Anderson, along with other failures, have spurred on the need for increased and accurate regulations in the auditing world.The corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 by the U.S. Congress, also known as SOX have largely influenced and contoured the international regulatory environment, particularly in the UK and EU. Primary elements regard, the introduction of an authority brought about to supervise and control public company auditors, namely the Public Company Accounting Oversight Board (PCAOB); limitations placed on auditors conducting non-auditing checks to their clients and documenting on the success of an organization's system of internal ...