Auditing And The Public Interest Assignment Example | Topics and Well Written Essays - 2000 words

Auditing And The Public Interest - Assignment Example Being prepared by either internal or external auditors, audit report gives the evaluation of the performance of a company. The reports are not only essential to the management but also they are heavily relied upon by other parties including the shareholders, government, financial institutions and the general public. It is important to note that auditors only give an opinion as to whether or not the financial statements depict the correct financial position of a company. This paper seeks to discuss whether the current international regulatory environment for the auditing is effective in ensuring that investors and owners are provided with reliable information by external auditors. Public interest in relation to the (accounting and) audit profession According to the International Federation of Accountants (IFAC) public interest entails the entity or individuals who are directly affected by the financial reports that are given by auditors or by the accountants. One of the major objectiv es that accountancy profession must strive to achieve is to safeguard the interest of the public. This includes provision of accurate and reliable financial information that is vital in making investment decision. ... essential to note that by ensuring uniformity in the financial statements of various companies, members of the public are in a position to determine the profitable and the well managed organizations. One of the major aspects of accountancy as depicted by Gonzalo (2009) is that in order to attain an efficient economy, it is vital for the financial accounts to be accurate and comparable. In this way, companies can access the risks that may negatively affect the public investments. He also stipulates that proper financial reporting results into efficient economic outcomes and common good while poor reporting adversely affect the performance of an economy. To create public confidence especially in the financial market, it is prudent for companies to provide adequate information that eliminates uncertainty which demotivates individuals to engage in transactions. Provision of independent certification which is the major role of auditors significantly creates confidence among the investors particularly in the current world of asymmetric information (Gonzalo 2009). In the same way, certainty is a key aspect that motivates individual to engage in purchasing of company products. In this regard, auditors should play an imperative role of public certification in order to increase public confidence and reduce uncertainty thus lowering the prices of the commodities. This will not only result to financial stability but also it generates social benefits to the individuals. One of the notable implications of proper auditing and professional accountancy is that they ensure comparability and verifiability of the financial information thus propagating public interest since they result to efficiency of markets. In order to ensure advancement of public interest, it is vital for auditors and