Audit Theory and Practice Article Example | Topics and Well Written Essays - 2000 words

Audit Theory and Practice - Article ExampleThis requires of the listener to issue a statement of independence containing a number of declarations such asAs per information derived from literature sources, the major criteria of a standard auditing process are lord ethics, auditors legal liability, audit risk, accepting the engagement and planning the audit, internal control over auditing process, audit sampling, designing substantive procedures, auditing different financial instruments and completing and reportage the audit (Cosserat, 2004, Eilifsen & Messier, 2006). Each of these core criteria will later be examined for strengthening our core argument that successful auditing can only ensue from a soaring degree of dissimilarity between auditors and the company being audited.The independence of auditors for various business activities has been ensured over a long period of time based on unsavoury corporate scandals such as Enron in 1997. At present, the International Federation o f Accountants (IFAC) as part of its standard code of ethics (revised rules) has proposed the following geomorphologic changes in auditing activities1. 1. Taking a conceptual approach to independence This is an approach which reconciles any perceived threat to independence of auditors, accepts safeguards and takes appropriate steps (interventions) to eliminate threats (Liandu, 2002). 2. No one strict set of rules Under IFAC guidelines, its no longer possible to allow just one set of rules for a given auditing scenario. This is because each specific scenario is now recognise for its own merit in order to generate a set of financial instruments for the auditing activity (Liandu, 2002).3. The importance of assurance services In addition to company data, auditors are now encouraged to increasingly rely on secondary data such as performance indicators, statistical information, market and media reports, systems and processes and compliance with regulatory guidelines (Liandu, 2002). The p urpose of assurance services is to enhance the credibility of overall information at the disposal of the auditor.4. Safeguards mechanism The general principle is that any kind of self-interest, self-review, advocacy, familiarity and disincentive can threaten auditing independence (Liandu, 2002). A number of safeguards are hence, proposed. Regulatory enforcement of independence requirements, external review of a firms quality control service, keeping technical data up-to-date, a corporate governance structure which provides oversight to services provided by a firm, communications about independence, rotating senior personnel and performing one-year review of the auditing exercise (Liandu, 2002).With regard to Cosserat (2004) core criteria of auditing