The Audit Expectations Gap Essay Example | Topics and Well Written Essays - 1000 words

The Audit Expectations Gap - Essay Example Essentially, the basic issue was not fraud detection by the auditors but the alleged act of in concealment which done the damage. Nevertheless, there is still no conclusive empirical evidence in the literature about whether and how auditing mechanisms influence the performance and the value of the firms; and, about how these mechanisms interact (in a complementary or substitute way) (Bohern and Odegaard, 2003). There are no hard and fast rules for auditing, which can be prescribed for all the countries. These rules can be different for different countries according to their needs and cultural settings. According to ICAEW (2002) with all the contrasts present in the rules and regulations of different countries emphasis is given to generic auditing principles of responsibility, accountability, transparency and fairness. Accountability of the board to shareholders who have the right to receive information on the financial stewardship of their investment and exercise power to reward or remove the directors entrusted to run the company. Transparency of clear information with which meaningful analysis of a company and its actions can be made. The disclosure of financial and operational information and internal processes of management oversight and control enable outsiders to understand the organisation. Fairness that all shareholders are treated equally and have the opportunity for redress for violation of their rights. According to Meigs et al. (1999) this information meets the needs of users of the information-investors. Creditors, managers, and so on-and support many kinds of financial decision performance evaluation and capital allocation, among others. (P.07) In case of Enron as mentioned by Vinten all the above mentioned rules were broken by the governing bodies. The management of the corporation resolutely focused on maximising profits and a 'legal obligation to act in the best interests of its shareholders. By and large, this excluded the corporation to act ethically or socially responsibly'(Slapper and Tombs, 1999). (Shah, 2002) states that some Trans-national corporations make more in sales than the GDPs (Gross Domestic Product) of many countries. In fact, of the 100 hundred wealthiest bodies, 51 percent are owned by corporations. While this can be seen as a success story from some viewpoints, others suggest that these and other large corporations are largely unaccountable for the many social and environmental problems that they leave in their wake, and that their size means that their effects are considerable. The multinational corporations who naturally have vested interests in international development and trade policies (like any group) are able to deploy enormous financial resources in an attempt to get favourable outcomes. The political power that is therefore held by such a small number of people impacts the planet significantly. As a result a few of these corporations make up some of the most influential sources of political and economic