- 20 Marks
AA – L2 – Q9 – Regulatory Framework for Auditing
Discuss current audit regulations and reasons for criticism regarding standards, fraud, non-audit services, and auditor tenure. Discuss reasons for criticism of current audit regulations on standards, fraud, non-audit services, and tenure.
Question
The auditing profession has been criticised recently for its role in monitoring potential corporate failure. Radical reforms have been called for in the way the audit is regulated. For example, there has been a call for a change of legislation in the following ways:
- Auditing standards: Auditing standards should be set and enforced independently from the accounting profession.
- Fraud: Auditing firms should have a duty to detect and report fraud.
- Non-audit services: Non-audit services supplied to an audit client should be stopped.
- The duration of the appointment of auditors: The appointment of auditors should be for a maximum period of seven years.
Required:
(a) Describe the current regulatory and professional requirements relating to each of the headings listed above.
(b) Discuss the reasons why you feel the audit profession has been criticised over the current regulations in the above areas.
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