The Auditing Profession Has Been Involuntary Place In The Spotlight Accounting Essay

In recent old ages, the scrutinizing profession has been nonvoluntary topographic point in the limelight due to the being of most extraordinary dirts in history such as the instance of Enron, World.Com and Tyco in United States ( US ) , Parmalat in Italy, Transmile and Megan Media in Malaysia. Due to this, there is broad concern on the being of outlook spread. The outlook spread exists when hearers and the public hold different beliefs about the hearers responsibilities and duties and the messages conveyed by audit studies. ( Hian and E-Sah, 1998 )

By and large, the existent function of the external hearer is to analyze the fiscal statements as in minutess to guarantee fiscal studies is true and just position following to the auditing criterions and codification of moralss. Besides that, external hearers has to be after and describe in consistent with quality control to enable audit is complete and moderately assured. ( Pickett and Pickett, 2005 ) The hearers claimed that whenever a fiscal dirt strikes the Malayan intelligence headlines, the public perceives the hearers as holding non performed their work diligently. This is because the populace does non hold the necessary cognition, ability or even want to measure the quality of an audit. ( Teck et al, 2009 ) [ online ]

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There are many factors refering to the misunderstandings of the public towards the scrutinizing profession as a whole. One of the causes of this unreasonable anticipation spread is due to the misconception of the audit study. There are assorted readings toward the messages in audit study which led to term called “ rationality spread ” and “ public presentation spread ” – Appendix A. ( Mohamed and Ahmad, 2004 ) [ on-line ] Less important than the expanded audit study, concern crises besides leads to new outlooks and demands of answerability. Such alterations in outlooks and demands will in bend lead to new demands on the audit map and finally to alterations in auditing criterions and pattern. ( Teck et al, 2009 ) [ online ]

Impacts of Audit Expectation Gap

The most noticeable attempt taken by the scrutinizing profession so far is the alteration on the dictions of the audit study. ( Mohamed and Ahmad, 2004 ) [ on-line ] Whilst the new audit study was found to be effectual in cut downing some countries of the spread and bettering users ‘ decision-making procedure, a study was conducted in Singapore and Australia where there were besides concerns over the addition of the spread countries refering to fraud sensing and bar every bit good as dependability of information presented in audited statements. ( Mohamed and Ahmad, 2004 ) [ on-line ] Not surprisingly, cardinal stakeholders appealed for a more user-friendly merchandise because the bing audit study was non sufficient and effectual plenty for the modern concern densenesss. ( Abdullah, 2010 )

Another positive impact towards the spread between the hearers and the populace is the issue on the quality control of audit. The Malaysia Institute of Accountants ( MIA ) issues criterions on quality control for audit every bit good as the Malaysian Approved Standards on Auditing which are adopted from international quality control and auditing criterions issued by the International Federation of Accountants ( IFAC ) . These quality control and auditing criterions are required to be following with approved company hearers who are all members of the MIA when transporting out audits on fiscal statements of companies of other entities. To farther heighten the quality of audits in Malaysia, the MIA in 2002 initiated a quality confidence programme for audit houses through the procedure of Practice Review. The procedure involves compulsory review of audit house ‘s patterns in transporting out audit work, in order to measure due conformity with quality control, scrutinizing and ethical criterions and to supervise the quality of audits of fiscal statement carried out by company hearers. ( Accountants Today, 2006 ) [ online ]

By and large, through being of populaces ‘ perceptual experiences, it can be observed that since the autumn of elephantine corporations such as Enron and WorldCom, scrutinizing criterions have been revamped to re-emphasize the hearers ‘ duties to observe fraud. ( Teck et al, 2009 ) [ online ] An audit professor besides remarked that one of the ways is to publish new scrutinizing criterions which require more to be done by the hearers. For case, The International Auditing and Assurance Standards Board ( IAASB ) Clarity Project was launched to promote greater usage of its criterions and ease the procedure of interlingual rendition of these into other linguistic communications. ( Jones, 2010 ) [ online ] An extra auditing criterion revamp will be the International Standard on Auditing, ( ISA ) 200 that requires hearers to keep an attitude of professional agnosticism. ( Jones, 2010 ) [ on-line ] Besides that, the job of sensed deficient criterions is so natural as it evolves discipline changes for scrutinizing profession harmonizing to society ‘s outlooks and these outlooks are non inactive. As a consequence, perceived lacking criterions will be at all times for a good alteration. ( Teck et al, 2009 ) [ online ]

In Malaysia, a great trade of attending has besides been paid to better the quality of audit and therefore fiscal statements with the purpose of heightening corporate and market repute. The constitution of the Audit Oversight Board ( AOB ) in the twelvemonth 2010 was a clear signal that the watchdogs intend to upgrade audit quality. ( Jennifer Lopez,2010 ) [ on-line ] They collaborated with local supervisory organic structures for illustration National Bank, Companies Commission of Malaysia ( CCM ) , Malaysia Institute of Accountants ( MIA ) and other self-acting boards from extra states such as United States, Britain, Australia every bit good as Singapore to safeguard honoring execution of a dynamic and independent audit inadvertence model. Finally, this board has carried out reviews to guarantee audit houses comply with International Standards on Quality Control and engagement reappraisals. Further, the AOB appealed their undertaking is to safeguard hearers of Public Interest Entities ( PIEs ) apply audit finest patterns. Besides that, AOB besides list members, countenances and standard scene. ( Yap, 2010 ) [ online ]

Despite the unreasonable outlooks issues evolved, there is still insisting that the value of audit is still needed besides recognizing that hearers could hold been able to give warnings in front of the fiscal crisis. Michael Izza, the main executive of the Chartered Accountants of England and Wales agreed that the value of audit today ‘s modern capital market is still really critical. ( Sanderson, 2010 ) [ on-line ] Though, the ACCA Council member every bit good as the manager of national accounting and audit of Deloitte UK questioned the necessity of audit. ( Abdullah, 2010 ) Witnessing the instance of Parmalat, if it was non for a judicial admission in Italian jurisprudence that requires companies to revolve hearers every nine old ages, the fiscal inadvertence would non hold been detected. The freshly appointed hearers Deloitte & A ; Touche questioned the spreads in Parmalat ‘s histories. ( New Straits Times, 2010 )

Another attack that has impact the value of the external hearers is widening and on-going professional instruction. The Malayan Institute of Accountants through its By-Law on Continuing Professional Education ( CPE ) has ever prioritized the demand for comptrollers, when presenting professional services, to make with appropriate respect for the proficient and professional criterions anticipated as an associate of the Institute in consistent with international criterions. ( Shah, 2007 ) [ on-line ] In add-on, in order to farther heighten the value of hearers in concurrence to diminish the degree of outlook spread is to supply a free professional development programme in regular footing to its bing members to guarantee go oning competence of hearers in Malaysia every bit good to fit them with an apprehension of the latest developments in the accounting and auditing universe. ( Teck et al, 2009 ) [ online ]

The hearers believed that the unreasonable outlooks may hold further harmful deductions for the audit profession as the populace may no longer be able to recognize the positive part of hearers to society, and this may farther sabotage the value of the audit map. This is because the responsibilities unreasonably expected of hearers do non warrant their attempts, peculiarly as such responsibilities may non be profitable to hearers. Therefore, attending should be given to the responsibilities that can moderately be expected of hearers. ( Teck et al, 2009 ) [ online ]

However, some hearers opined that unreasonable outlooks can non be wholly eliminated from public perceptual experience because the populace is non paying for the audit map. ( Teck et al, 2009 ) [ on-line ] Auditors gripe that they are undervalued and clients gripe that hearers overprice their services. The consequence of this is that hearers may be wary of making so much because they can non afford it. ( Gomes, 2010 ) [ on-line ] The cardinal comment here is to pay what the hearers are deserving in order to continue their independency. The value of an audit sentiment remainders on the independency of the hearer. In the Malayan surroundings, audit fees are laughably low. ( Jennifer Lopez, ACCA ) [ on-line ]

In add-on, another issue faced by the external hearers is their liability. Delegates systematically stated that this was a barrier to invention and to hearers taking on farther duties. ( Cosgrove and Thompson, 2010 ) [ on-line ] It can be assumed that due to this outlook spread, the occurrences of fraud have an inauspicious consequence on the hearers ‘ repute. For illustration, Anderson, the hearer has been blamed in pulverizing the audit grounds in the Enron instance. ( Haron, 2010 ) [ on-line ] On the other manus, the planetary round table has overall prevue that there is still more for hearers to convey into the economic system and it is the profession and the stakeholders that has to travel with cardinal solutions. ( Cosgrove and Thompson, 2010 ) [ online ]


To cut down the job of unreasonable outlooks every bit good as reconstructing the value of external hearers, stairss should be taken to convey about better consciousness of the aim of scrutinizing and the work of an hearer amongst members of society in general.

As for the populace, it is recommended that free seminars be conducted on a regular footing by the regulators of the accounting profession at which the existent function of hearers and the map of scrutinizing are clearly presented to the populace. This could be achieved through the usage of mass media where a particular column is designated in the newspapers on a hebdomadal footing, in which the aim, nature and restrictions of scrutinizing are explained. ( Teck et al, 2009 ) [ on-line ] Further, when a trial of questionnaire was conducted among the hearers and concern pupils, there were similar perceptual experiences on audit map except the country of fraud sensing. The spread was lower before the pupils started their audit coursework. Hence, audit instruction could still be considered as an effectual manner to diminish degree of outlook spread in future calls. ( Mohamed and Ahmad, 2004 ) [ online ]

Besides that, auditees should besides be exercised by an appropriate engagement missive may assist to educate them. It is suggested that MIA should reexamine the rightness of the content of the engagement missive to guarantee that a relevant, comprehensive and easy apprehensible description of the existent function of hearers is included. This, in bend, would assist to cut down misinterpretation of hearers ‘ duties and to better communicating between these two parties. ( Teck et al, 2009 ) [ online ]

As per lack of statute law, the possible ways is research to find the outlooks of society as to the responsibilities of hearers should be conducted on a regular footing in order to place society ‘s current outlooks of hearers. This would supply utile information from which the regulators could revise the bing statute law, thereby guaranting that statute law remains moderately in line with the outlooks of society. ( Teck et al, 2009 ) [ online ]

Coming into the spotlight are the forensic accounting society due to lift of frauds and white-collar offenses. It is a combination of accounting, scrutinizing and fact-finding accomplishments assembly. It is indicated that forensic accounting can be a degage niche confer withing group, compromising hearers. Yet, there is still in demand of more skilled professionals to be accepted in this group of accounting. However, at the terminal of the twenty-four hours, forensic professionals would come from the wider household of comptrollers and hearers. ( Accountants Today, 2009 ) [ online ]


The scrutinizing profession believes the addition in judicial proceeding and unfavorable judgment of hearers can be hints to the audit outlook spread. The reappraisal of the causes of an audit outlook spread shows that the grounds for such a job are so varied and complicated. The audit outlook spread is damaging to the scrutinizing profession as it has positive every bit good as negative impacts on the value of scrutinizing and the repute of hearers in modern society. Positive values that arose are the alteration of the audit study, amendment of the auditing criterions every bit good as improved audit quality through the constitution of Audit Oversight Board. On contrary, the negative impacts are hearers were undervalued of their independency and the unreasonable anticipation avoided invention to take farther duties.

Based on the findings of the causes of the audit outlook spread in Malaysia, there are several redresss for shuting the spread. There are supplying free seminars through media mass, hearers to exert appropriate engagement missive and farther to implement forensic accounting. It is hoped that these proposed solutions will supply the regulators of the accounting profession in Malaysia with some meaningful penetration into ways to extenuate the audit unreasonable outlook. This, in bend, should assist to heighten the quality of accounting and scrutinizing patterns in Malaysia.


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