Auditing Regulation in the UK & Australia - Case Study Example

Table of Contents Introduction 2 Auditing 2 Auditing Regulation in UK & Australia 3 Auditing Enforcement in UK & Australia 5 Content of Financial Report in Auditing 6 Role of Auditor in UK & Australia 8 Conclusion 9 References 10 Introduction Increasing corporate governance norms and intensifying pressure on business has made all business irrespective of their size and nature to look towards ways through which they will be able to ensure that the financials statement depicts the true & correct picture. The importance of it increases as being able to demonstrate the correct picture ensures that the business is able to present a true and fair picture which has no misrepresentation. Different economies look towards developing their own rules regarding reporting and auditing based on the accounting rules followed by them. Despite the difference in which the subject is dealt special care has been made to ensure that the business looks to match the international standard and is able to apply the different rules correctly and fairly. This paper looks towards comparing the different accounting regulations with regard to auditing is followed in UK and Australia so that a comparison between the financial reporting pattern can be understood and the manner in which both the economy looks towards strengthening their financial structure can be identified. Auditing Auditing has been defined differently by different people but the simple definition for auditing is that it is the examination and expression of the opinion of the financial statement to ensure that the accounting statement is fair and accurate and there is no misrepresentation. It has also been observed that different cultural fcators give rise to different perception with regard to the audit function. For example, it is seen that the Australian Accounting Standards look towards ensuring that the financial statement is accurate and represents the true and correct picture of the organization where the UK accounting rules requires that it adheres to the legislation that has been laid down by the accounting board. Despite the different perceptions that the different economy have with regard to the auditing process it is seen that all the financial statement are prepared so that the reader of the statement can understand the financial position of the company due to which care has to be taken to ensure that it is true and accurate (Arel, Brody and Pany, 2005). Auditing Regulation in UK & Australia Despite the different process in which auditing process is carried out both in UK & Australia it is seen that both the economies look towards ensuring that all the companies have their accounts audited to certify the fact that the financial information disclosed by them is true and correct except in case of small companies in the UK which falls under Section 249A (1) of the Companies Act, 1985. Australia legislation requires that all companies have their accounts audited so that accuracy and transparency in this regard can be maintained. Thus, both UK & Australia have looked towards determining the different audit procedures and legislations that are applicable to their economy (Carey and Simnett, 2006) This helps to understand the fact that accounting standards are the guide and principle which helps to determine the audit procedure that the economy will look towards using. This has made the UK economy to look towards ensuring that the auditing standard in UK includes both the basic principles of auditing and the essential procedures that have to be followed. In case of Australian economy the auditing standard that has been determines by the economy will have to taken care of so that the accounting procedure followed is appopriate and correct and according to the International Auditing and Assurance Standards Board requirements (Geiger and Raghunandan, 2002). This has made both UK & Australia follow a set of formal accounting standard which has to be followed by an accountant who looks towards auditing the financial statement of the company. This has made both the economy to follow the accounting standard guidelines that have been laid down by their respective board. The Australian economy looks towards following the auditing standard that has been prescribed in the Statements of Auditing Standards (AUS) 1. The prescribed code has been determined both by the Australian Accounting Research Foundation (AARF) and are issued jointly by the Institute of Chartered Accountants in Australia and the Australian Society of Accountants. It is important that all organizations conducting their business in Australia look towards complying with the terms mentioned in the standard and not being able to comply with them would lead to disciplinary action. This will be regarded as “discreditable” and will be liable for actions both against the organization and the accountant (Chi and Huang, 2005). The UK economy on the other hand looks towards following the standard that has been prescribed by the Auditing Practices Board (APB), which has been changed and applied so that Auditing Practices Committee (APC) can be replaced. The APB was developed by Consultative Committee of Accountancy Bodies (CCAB) and the members of the CCAB which looks towards ensuring that the auditing reforms were better developed and ensured better clarity and transparency. The APB has also taken steps and direction to develop the auditing standard so that there is better transparency and the decisions that are taken will ensure correct representation of the financial statement. This has led towards the development of Accounting Standard which the firms need to comply with and the use of Auditor’s Operational Standard” and the “Statement of Auditing Standard 600 which are already in place will ensure that the accounting standards are able to deliver better performance and will ensure that the financial statement highlights transparency and clarity (Lyer and Rama, 2004). Auditing Enforcement in UK & Australia This has thereby helped to develop the accounting standard enforcement in such a manner that it will ensure better achievement of the accounting goals and ensure clarity. The Australian economy looks towards ensuring that based on the International Auditing and Assurance Standards Board the organizations are able to enforce proper method through which the auditing process will be determines so that there is complete transparency and proper collection of information. This has made the Australian economy to ensure that the accounting practices are put in practice through the Code of Professional Conduct which has been provided by the Institute of Chartered Accountants in Australia and the Australian Society of Accountants. This will enforce a correct method through which the process of auditing is carried out and transparency maintained. The UK economy on this front looks towards using the accounting standard that that has been developed by Section 25 of the Companies Act, 1989. This will require that the auditor who looks towards auditing the books of account look towards ensuring that the auditors are registered with the Companies Act 1989 and must be recognized by the supervisory body so that they are eligible for auditing the books of accounts. It is imperative that each RBS looks towards adopting the disciplinary and regulatory procedures which has been provided under the Statements of Auditing Standards (SASs) so that better monitoring can be made and steps developed through which the books of accounts are audited correctly. Despite having a different code of conduct which has been laid by different body both the economies look towards ensuring integrity, objectivity and independence to ensure that the auditing process is clear. It requires that the different accounting board has looked towards ensuring that the professional body acts in a manner which looks towards protecting their interest and ensuring that the stakeholders are protected so that the overall benefit can be passed on to ensure transparency and adhering to the corporate governance requirements that have been identified. Content of Financial Report in Auditing The different governing bodies have also let down the different contents which the financial report has to ensure and it is the job of the auditing committee to ensure its correct representation. This has resulted in the creation of differentiation between the manners in which additional information will be provided in the financial statement. The UK economy based on principles provided by the Auditing Practices Board (APB) has looked towards following the Statement of Auditing Standard (SAS) 600 which prescribes the manner in which the additional information needs to be provided in the financial statement. It is mandatory for organizations working in UK to ensure that they provide the additional information based on the code of practices that have been provided. In case of Australia the board hasn’t laid down any such principles which don’t make it mandatory to provide with additional information in the annual report (Barry and Brown, 2005). The representation of information is the financial report has to be true and fair as required in case of UK but the governing body has not described what true and fair would mean. It is important that the audited financial information contains the information that it is true and fair. In case of Australia some changes have been made where the word “true & fair” has been replaced by “present fairly”. This means that the financial statements matches the requirements of the generally accepted accounting standards and is consistent throughout. This has helped to give direction to the process of auditing and ensuring that the information displayed is true and fair in comparison to UK where the actual meaning is missing and doesn’t provide conclusive direction in which the auditor has to act (Anderson and Reeb, 2004). A look the financial which look at the figures which have been audited looks towards ensuring that in UK only the present year figures are audited and the previous year financials are only provided as it is mandatory by law whereas in case of Australia both the years are adequately represented. This helps the reader of the financial statement to gather different information based on their requirements based on which the value and efficiency of the audit statement can be gauged. Role of Auditor in UK & Australia The provisions as laid by the different accounting board has also made it mandatory for both the UK & Australian economy to ensure that the auditors has to take responsibility for an opinion that has been expressed. It is the moral duty and liability of the auditor to ensure that the information provided by him is verified and true. In case the auditor looks towards looking over the work of other and is not fully satisfied that the material information provided is true and correct then reliable assurance has to be provided so that the description provided is true and matches the audit requirements (Carcello and Nagy, 2004). The difference between the processes of completing the audit process is seen both in UK and Australia where both look towards different ways. Australia looks towards ensuring that the auditor signs the financial statement on the day when the audit process has been completed and looks towards ensuring that the audit report is signed when the field work gets completed. The UK accounting regulation varies slightly as it looks towards ensuring that the auditor signs the audit statement when the report will be out for distribution and the date at which the field work has been completed thereby has little or no relevance. This results in widespread differences considering the time when the report is completed and looks towards distinguishing the services in both the economy (Chaney, Jeter and Shivakumar, 2004). The differences between the frameworks which has helped to determine the manner in which the rules governing the audit procedure will be developed is based on the different standards that have been adopted. The fact that Australian economy looks towards following the auditing standard that has been prescribed in the Statements of Auditing Standards (AUS) 1 whereas the UK economy follows standard that has been prescribed by the Auditing Practices Board (APB) has made differences between the manner in which accounting practices are developed in both the economies (Ashbaugh, Collins and LaFond, 2004). Conclusion Thus, there are widespread differences that exist between the process which has helped to determine the audit procedures and rules governing both the UK and Australian economy. Despite it special consideration has been made to ensure that it matches the requirements of International Auditing and Assurance Standards Board which has thereby influenced the manner in which accounting process is developed. Despite the different perceptions that the different economy have with regard to the auditing process it is seen that all the financial statement are prepared so that the reader of the statement can understand the financial position of the company due to which care has to be taken to ensure that it is true and accurate. This has ensured that it matches the international requirements and ensures correct representation of the financial position. References Anderson, R. and Reeb, D. 2004. Founding-family ownership and firm performance evidence from the S&P 500. The Journal of Finance 58 (3):1301-1328 Arel, B., Brody, G. and Pany, K. 2005. Audit firm rotation and audit quality. The CPA Journal 2005 75(1): 36-39 Ashbaugh, H., Collins, D. and LaFond, R. 2004. Corporate governance and cost of equity capital. Working paper, University of Wisconsin, and University of Iowa Barry, C. and Brown, S. 2005. Differential information and security market equilibrium. 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