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A discussion of auditor judgment as the critical component in audit quality – A practitioner's perspective

A discussion of auditor judgment as the critical component in audit quality – A practitioner's... Interest in issues related to auditor judgment by parties outside the profession has shown a substantial increase since the events that led to the passage of the Sarbanes–Oxley Act in the United States. Changes in the regulation of the activities of auditors of public companies in the United States have placed an increasing emphasis on the role of professional standards and of inspections in monitoring and influencing auditor judgment. There is a fundamentally important difference in judgments made by auditors in forming and expressing audit opinions and those made by third parties in evaluating the effectiveness of these judgments after release of the auditor's report. This difference should be recognized by users of financial statements and regulators. Audit judgments are unique to each individual audit and comparing audit judgment across audits presents significant challenges that should be addressed carefully to avoid unintended consequences. In recent history, changes in accounting principles have increased the inherent variability of financial statement amounts and, correspondingly, have increased the importance of disclosures. Although the primary focus of good auditor judgments and audit quality is at the engagement level, the current regulatory environment and the structure and business model of audit firms are of increased importance in influencing those judgments. These factors also influence the independence and professional skepticism of auditors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Disclosure and Governance Springer Journals

A discussion of auditor judgment as the critical component in audit quality – A practitioner's perspective

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Publisher
Springer Journals
Copyright
Copyright © 2010 by Palgrave Macmillan, a division of Macmillan Publishers Ltd
Subject
Business and Management; Business and Management, general; Accounting/Auditing; Corporate Finance; Corporate Governance
ISSN
1741-3591
eISSN
1746-6539
DOI
10.1057/jdg.2010.19
Publisher site
See Article on Publisher Site

Abstract

Interest in issues related to auditor judgment by parties outside the profession has shown a substantial increase since the events that led to the passage of the Sarbanes–Oxley Act in the United States. Changes in the regulation of the activities of auditors of public companies in the United States have placed an increasing emphasis on the role of professional standards and of inspections in monitoring and influencing auditor judgment. There is a fundamentally important difference in judgments made by auditors in forming and expressing audit opinions and those made by third parties in evaluating the effectiveness of these judgments after release of the auditor's report. This difference should be recognized by users of financial statements and regulators. Audit judgments are unique to each individual audit and comparing audit judgment across audits presents significant challenges that should be addressed carefully to avoid unintended consequences. In recent history, changes in accounting principles have increased the inherent variability of financial statement amounts and, correspondingly, have increased the importance of disclosures. Although the primary focus of good auditor judgments and audit quality is at the engagement level, the current regulatory environment and the structure and business model of audit firms are of increased importance in influencing those judgments. These factors also influence the independence and professional skepticism of auditors.

Journal

International Journal of Disclosure and Governance – Springer Journals

Published: Sep 16, 2010

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