Explain and evaluate the significance of the IAASB clarity project for UK audits - Essay Example

As a result, any case of bankruptcy of corporations whose financial accounts were audited; would directly or indirectly point out the role and possible and probable contribution of auditors. Since the fall of Enron, WorldCom and the most recent global financial crisis, the role and practices of auditors have come under more scrutiny than ever before. And these scandals and termed as ‘audit failures’, defined as an event in which the auditor fails either to implement generally accepted accounting principles or to issue qualified report.

( Francis, 2004). But, previous research suggests that audit failures result in the impairment of auditor reputation, as witnesses by a loss in market share (Firth, 1990; Wison and Grimlund, 1990; weber et al.2008), also lower audit fees (Davis and Simon, 1992). The recently emerged financial conditions have put more pressure on the International Auditing and Assurance Standards Board (IAASB) to revisit some of the basic International Standards on Auditing (ISAs). Undoubtedly, the use and need of these international auditing standards is never more needed and felt than this time.

In the current economic and financial global circumstances, the need and significance is timely understood and realised by the IAASB. In collaboration with other international professional auditing, accounting and other professional bodies, the International Auditing and Assurance Standards Board began its working on the clarity project in the year of 2006 (Smith, 2010). This clarity project is designed and established to reduce the ambiguity in some of the standards on the auditing, and it is designed to enhance clarity on some of the standards.

Additionally, another significant aim of this clarity project is introduced to enhancing understandability on some of the auditing standards. The new clarified audit related standards came into force in the UK and in Ireland for the purpose of audit of financial statements for period ending on or after the date of 15 December 2010, But, before going to explain and evaluate this clarity project for UK, it is vitally important to understand the main objectives behind the establishment of the International Auditing and Assurance Standards Board.

Background of International Auditing and Assurance Standards Board The IAASB is established to develop auditing and assurance standards