Accounting
When it comes down to preparing the financial statements of a company,the auditor's opinion matters the most because he/ she is the one thatprovides the investors with critical assurance that the financialstatements have been meticulously examined by an unbiased, and skilledprofessional, so that investors can blindly rely on them. It is mandatoryfor the auditors to be independent of a company; otherwise the investorswill have little confidence in the auditor's opinion leading to fewerinvestments in that public company's stocks. Almost over three years ago, the collapse of several high profilecompanies notably, WorldCom and Enron made the investors in the UnitedStates have very little confidence left in making investments. The truth isthat the world is very closely watching the US failures, and alsoquestioning, why have they occurred' Where were the auditors' The instant
Auditors do not guarantee the accuracy of financialinformation, especially because they are only required to implement areasonable degree of skill and care in forming an opinion about whether thecompany's financial reports comply with accounting standards and give atrue and just view of the company's financial position and performance. Some of the laws reveal that there are certain limitations of theaudit function. It is quite surprising to note that these failures roused debates inthe media, especially, since it was discovered that the rendered uselessaccounting firm, Andersen, had signed on financial statements whichoverstated Enron's earnings by US$586 million over five years, and hadevidently released a large volume of documents about the Enron collapse. Under the corporations Act, the auditor's report must state theauditor's opinion about these issues, and if the auditor feels that thefinancial reports do not comply with the Corporations Act, then the reportshould have the reasons for this opinion. Also, auditors are not the watchdogs of good corporate conduct. However, it is acceptable for an auditor to reviewrather than perform full audit in the case of half-year reports. Anauditor is also to write up financial reports in accordance with theCorporations Act that comply with the accounting standards and alsoprovides the investors with an accurate picture of the company's financialposition. Other evidence shows that in Australian Securities andInvestments Commission survey of 100 of Australia's largest companies, itwas found that most companies retained their audit firms to provide non-audit services. Theirliability to shareholders, other investors and the audited company for afailure to detect fraud and misconduct by company employees is limited. This is why the auditors cannot be held responsible forguaranteeing that the financial statements can be free of errors for acompany. The fraud committed by Andersen led investors to focus on the otheraccounting firms. It was also discovered that on average, non-audit feesaccounted for nearly 50 per cent of the total fees paid to the audit firm Auditors have the task of performing a specific statutory function asstated under the Corporations Act 2001 (`Corporations Act'); it ismandatory for companies to appoint an auditor to audit the annual and half-year financial reports. ction of the watchdogs worldwide has been to point the finger at theauditors. Theruling of the courts have made it clear that companies and their boards ofdirectors are solely responsible for good corporate management, and thatthey are not given the authority to renounce this responsibility to theauditors.
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Acceptance Essays
