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Audit

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  • April 12, 2014
  • 2666 Words
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  • Course: Accounting 302 Audit
  • School: ACU
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Audit:
Creating Confidence by decreasing the expectation Gap

Confidence of providers and users of capital are integral to economic success. Often in even the most modest models of finance, financiers will not lend to those who would borrow deprived of adequate information to convince the financier that the capital will be repaid. Based on the financiers interpretation of the risk associated with the return of capital, interest is set either deliberately or unintentionally. Sophisticated financial markets operate on the same basis. Whether it be stock traders, venture capitalists, Banks or, they wholly assess the risk to capital return, established by their assurance of the validity of information they have regarding the debtor and the debtors’ ability to return capital. Absent or inadequate information leads to greater risk and an elevated, conceivably unfeasible high, return(Pandey, 2009). External auditors perform audits in harmony with laws or accepted principles on the financial statements of corporations, government entities and is independent of the entity. Users of financial information depend on unbiased and independent audit reports. Nineteenth century auditors claimed it was their responsibility for fraud detection as an audit objective. Auditors’ responsibility as indicated by Razee & Riley (2010) was to report to stakeholders any dishonest undertakings which transpired affecting the correctness of the financial statements. Though, it was also contended that auditors should not be required to discover wholly fraud committed within the corporation, because auditors are not insurers or guarantors, but instead should be expected to conduct audits with reasonable skill (Ainapure & Ainapure , 2009). Roles and responsibilities of the Auditor have changed over the last twenty years due to growing complexity of laws and regulations coupled with a changing professional environment. This has led to misunderstandings and difference in expectations of...