In market societies, auditors are remunerated by the client company rather than by an independent body. This, inevitably, makes them dependent upon directors for their fees and profits. Auditing firms may legitimise their status by appealing to profession - Essay Example

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This, Inevitably, Makes Them Dependent Upon Directors For Their Fees And Profits. Auditing Firms May Legitimise Their Status by Appealing To Profession
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In market societies, auditors are remunerated by the client company rather than by an independent body. This, inevitably, makes them dependent upon directors for their fees and profits. Auditing firms may legitimise their status by appealing to profession
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Extract of sample "In market societies, auditors are remunerated by the client company rather than by an independent body. This, inevitably, makes them dependent upon directors for their fees and profits. Auditing firms may legitimise their status by appealing to profession"

Download file to see previous pages The International Federation of Accountants (IFAC) has set ethical standards for the accounting profession that includes integrity, objectivity and confidentiality linked with the auditing profession and many more. The auditors offer their service to the external client companies that in turn has raised the issue of independence both in case of internal as well as external auditors. The auditing practices and the dependence of the auditors on the client company have increased to a large extent for the purpose of remuneration rather than to act as an independent body. The absence of independent body has raised the reliance on other companies (Sikka & et. al., 2009). Various audit standards and sections of the Corporations Act 2001 in the context of independence have been effective measures for ascertaining that auditing functions are performed ethically (Kaplan Financial Limited, n.d).
In this respect, the essay focuses on the audit standards important for auditors to accept such standards as fundamental principles to perform operations ethically. In addition to this, the paper examines the nature of audit expectation and its various components. Furthermore, the factors affecting the expectation gap has also been analysed. The audit expectation gap has been analysed on the basis of financial crisis of 2008 and its impact on the auditor’s role.
The need for ethical code arises in case of auditing; as the accountants are needed to work with respect to the public interests and they hold the position of trust in the society. It is the responsibility of the professional accountants to work in the interest of general public and to maintain the reputation associated with accounting profession. International Federation of Accountants (IFAC) is responsible for setting the standards of auditing that are likely to be followed internationally (International Federation of Accountants, 2006; Kaplan Financial Limited, n.d.). Some of the ...Download file to see next pagesRead More
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