Audit failure and regulatory workload

Article Abstract:

The high-profile collapse of companies such as Maxwell, BCCI, Colorall and Polly Peck has shaken the public's faith in the auditing profession. While these corporate collapses were not directly caused by any action of the audit firms involved, they are, nevertheless, a grave indication of the failure of audit firms to protect the interests of investors and lenders, not to mention the interests of suppliers, employees and customers who were equally hurt by the irresponsibility of these failed companies' management. In each of these corporate collapses, the failure of auditing firms to stop the publication of financial statements which later proved to be false could be seen as an indication of the abandonment by individual auditors of their responsibility for upholding accounting standards. In the final analysis, these celebrated corporate collapses also demonstrate the dangers of regulatory overload in the auditing profession.

Analysis, Column, Business failures

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E&Y calls for independent regulator

Article Abstract:

The UK audit profession's response to the Auditing Practice Board's (APB) 'Audit Agenda' on future regulation has been largely negative. One of the Board's biggest critic is Ernst & Young, which is proposing the establishment of an independent regulatory body to put an end to the current practice of self-regulation. The accounting firm contends that the APB is mistaken in its belief that it can meet increasing public expectations on its own. It argues that only a truly independent regulator can effectively deal with public concern issues, such as the delivery of profitable add-on services and the impact of low-balling on auditor on auditor independence. Members of the academe who also responded to the Audit Agenda agree with Ernst & Young that an independent regulatory body should be created. Other smaller practitioners who commented on the APB document were likewise critical of both the Audit Agenda and the Board itself.

Regulation, Licensing, and Inspection of Miscellaneous Commercial Sectors, Accounting Services Regulation, Public opinion, Independent regulatory commissions, Ernst & Young L.L.P., Accounting law, Auditing Practices Committee

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A self-regulatory success story

Article Abstract:

Congressional hearings on the alleged shortcomings of the US auditing profession in the 1970s prompted the American Institute of Certified Public Accountants (AICPA) to establish the Public Oversight Board (POB). Anxious to restore the public's confidence in the profession whose reputation suffered considerably as a result of close Congressional scrutiny, the AICPA introduced a peer review program whose aim was to improve the auditing through such activities as regular evaluation of corporate quality controls and compliance, a review of audits, and annual reporting of the auditing firm's practice. The POB was designed such that most of its members have to come from outside the accounting profession to ensure that it can review auditing performance objectively. The Board has been very successful in influencing and regulating the auditing profession in its 18 years of existence.

Case studies, American Institute of Certified Public Accountants. Public Oversight Board

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