Development, Roles and Authority of International Standards on Auditing - Coursework Example

ANALYSIS ON INTERNATIONAL STANDARDS OF AUDITING Student’s Name Course Professor’s Name Date Institutional Affiliation Development, Roles and Authority of International Standards on Auditing (ISAs) The very first efforts of coming up with an international set of standards for auditing was initiate in 1969 (Roussey, 1999). During this time, there was a series of publication reports that were directed towards international auditing by the then Accountants International Study Group-a body that was used for the purpose of comparing the auditing situations in Canada; UK and the USA. Immediately after this, there was establishment of the International Accounting Standards Committee in the early 1970s-an effort that resulted to a call for setting up a similar body that would oversee and regulate the auditing section of accounting (Roussey, 1999). As a result of these calls, there was the establishment of the International Auditing Standards Committee in 1978, which was then used for purposes of comparing auditing practices across the globe and thereafter, come up with a framework for developing auditing standards that could be adopted internationally. Today, international auditing standards are formulated and issued by the International Auditing Assurance Standards Board (IAASB), which is basically a standard-setting body that is focused on operating within an independent position (Roussey, 1999). The IAASB was formerly presided by the IFACs International Audit Practices Committee for the purpose of serving the public interests at large through formulation of high-quality auditing standards, assurances and quality controls mechanisms that was to facilitate the interconnection between international and national standards. In fact, the convergence between the national and international standards was promoted for the purpose of enhancing the level of quality and uniformity of practices across the entire glove while still making sure to empower the public confidence in the worldwide auditing and assurance profession as a whole (Roussey,1999). As noted earlier, the overall mission of IAASB lies in prompting the convergence and application of a sole internationally-endowed standards of auditing. Consequently, the major roles of international auditing standards rest with the development of uniformed auditing practices as well as processes across different countries in the world (Christmann & Taylor, 2006). It is important to note that the International Standards of Auditing (ISAs) encompass fundamental principles and essentials processes for auditing together with a related guidance in the form of explanatory and other forms of proper materials. These fundamental principles and procedures are expected to be interpreted within the confinement of the explanatory as well as other necessary materials that seeks to provide imminent guidance on their overall application (Christmann & Taylor, 2006). In this regard, the IFAC has ensured to come up with a Compliance Committee that would help to analyse how each of the member bodies have made efforts to adopt the International Professional Practices Statement on Assuring the Quality of Professional Services. It will also seek to note whether there are basic comparison and contrasting processes that are investigative and disciplinary in nature for all member bodies (Christmann & Taylor, 2006). However, it is important to indicate that the International Standards on Accounting will not be expected to overlook and outdo national regulations or even pronouncements that govern the overall audit of financial information within a specific country. In fact, in such countries as the United States of America and the United Kingdom as a whole; the aspect of compliance with national auditing standards has been streamlined to comply with international standards (Christmann & Taylor, 2006). In the event that there is a notable difference between these international standards and those of a particular country; then this is sorted by way of achieving a harmonisation playground. International Standards of Auditing have continued to be employed ad adopted in many countries. In 2005, the Chinese Auditing Standards Board as well as IAASB formulated and released a joint report for which the latter body postulated that the basic principle of drafting the Chinese auditing standards rest with improve its overall standard systems hence prompt convergence process (Christmann & Taylor, 2006). Reasons for Auditing Standards and the Role of Professional Bodies in the Regulation of Auditors in the UK There are a far number of reasons for adoption f auditing standard within the auditing profession as a whole. These functions are discussed as follows; First, it is noted that auditing standards promote the aspect of independence amongst the auditors of a firm (Harris, 2014). In a company, the duties and efforts of an auditor would, for most cases, be restricted by the management since they play a big part in paying for the services rendered. Investors and other notable stakeholders of a given can however; have immense confidence in the opinion of the auditor if it is clearly ascertained that there is no interference of these opinions from third-parties (Harris, 2014). In this regards, the auditing standards through numerous bodies come up with a requirement that imposes this level of independence on the auditor-client relations for purposes of creating a mutual interest between them privy to management’s ideas and manipulation. Secondly, the auditing standards and regulatory bodies offer a set of guidelines for determining the business model of any given company (Harris, 2014). Auditors are now able to categorise different firms within their respective sectors for purposes of ensuring that their operations and activities are monitored and conform to international practices. It is through the auditing services and standards that management might get to understand how to effectively apply their business model legally to achieve even greater returns in the future period (Harris, 2014). Third, the auditing standards are meant to enhance the objective of achieving a high degree of rim transparency. Auditors use different auditing standards to gain public confidence (Harris, 2014). In fact, there is a requirement that all public companies in the United Kingdom and the world over to always make their financial statements public so that they can be analysed and scrutinised for transparency purposes in turn, this helps to instil disciplines and improve on focus, accountability and trust as well. In the United Kingdom, auditors are expected to adhere to the accounting and auditing standards set in place as well as stock exchange rules that are also the source of laws (Australian Government, 2015). The Audit Practices Board is the major recognised auditing standard setter within the United Kingdom. However, the standards that are issued by APB do not carry the force of the law. It is safe to understand that under the Companies Act 1989, (UK), the major auditing professional bodies are only mandated to register company-based auditors while the Financial Reporting Review Panel (FRRP) and the Department of Trade and Industry (DTI) are mandated with an investigative duty to ascertain possible irregularities in the financial reports presented for public scrutiny (Australian Government, 2015). All in all, the professional bodies in the United Kingdom are directly responsible for disciplining their own members however; much serious cases should be taken to the Joint Disciplinary Scheme. ISAs and National Auditing Standards in Individual Countries Influence Each Other It is worth noting that international harmonisation of auditing standards remains to be a very important aspect as it assures the international capital markets that auditing process being conducted within a given country is consistent with all companies across the globe (Morais, 2001). However, the possible variations that exist within audit reports of companies from different countries are majorly as a result of specific auditing standards that are adopted in the course of preparing those reports. For instance, there are companies that engage in adopting local auditing standards while others solely rely on the International standards of Auditing or even U.S-based auditing standards. For instance, the audit reports of a number of German-based companies like Bayer AG are prepared using both the German Auditing Standards as well as the International Standards of Auditing (Morais, 2001). However, Hoechst AG, the audit reports are prepared in accordance with the German Auditing Standards but makes sure to include a statement ascertaining the preparation of the report was cognizant of uniformity that conform to the U.S GAAP. In the case of Unilever, the auditing reports are prepared in accordance with the auditing standards of three international countries that include; US, UK and Netherlands. The efforts being made to achieve harmonisation of international standards on auditing with the national standards continues to bore fruits (Morais, 2001). In 2005, the Chinese Auditing Standards Board (CASB) as well as the International Auditing and Assurance Standards Board (IAASB) went ahead to release a joint statement for the very first time for which the CASB postulated that the basic principle of coming up with report was entirely focused on improving the overall Chinese auditing standards systems as well as help with the acceleration of the convergence efforts being made amongst the many different countries across the globe with a worldwide recognise standard(IAASB) (Morais, 2001). International harmonisation of the national and international standards and their influences on each other within different countries is expected to promote the credibility of the reports being availed through corporate websites and statements; assure the international capital markets that a uniform criterion has been used for the application within different countries as well as enable audit firms to improve on their immediate level of efficiencies and effectiveness of the auditing practices across the different countries (Morais, 2001). References List Australian Government. 2015. Strengthening the Financial Reporting Framework; Oversight of the Auditing Profession. Retrieved from https://archive.treasury.gov.au/documents/403/HTML/docshell.asp?URL=Ch2.asp Christmann, P. & Taylor, G., 2006. Firm self-regulation through international certifiable standards: Determinants of symbolic versus substantive implementation. Journal of International Business Studies, vol.37, no.6, pp.863-878 Harris, S, B. 2014. ‘The Importance of Auditing and Audit Regulation to the Capital Markets. Public Company Accounting Oversight Board. Retrieved from https://pcaobus.org/News/Speech/Pages/03202014_American.aspx Morais, H.V., 2001. The Quest for International Standards: Global Governance vs. Sovereignty. U. Kan. L. Rev., 50, p.779. Roussey, R.S., 1999. The development of international standards on auditing. The CPA Journal, vol.69, no.10, p.14 Read More