LEGAL ISSUES ON THE SCANDALS INVOLVING AUDITORS
Abstract There is a need to clarify the duties and obligations of auditors due to the recent spate of financial scandals. All the scandals involve big auditing firms. This is so although there has been a study that big auditing firms provide higher quality audit. Financial scandals have always been one of the major reasons for change in the company law. Nevertheless, it should not be a case of learning the wrong lesson from those financial scandals. The financial scandals prove to show that the auditors have fallen below the expected standards. If a company were to fail within certain months after being audited, the auditors are blamed for conducting an inferior audit. Thus, the most common question asked whenever there has been a financial scandal is, whether the auditors carried out their duties and obligations properly and whether they were objective. Thus, this study examines the financial scandals involving auditors which occurred in Malaysia and in other countries. In reviewing the scandals, the study will investigate the reasons and cause for such scandals. The study will show whether the auditors’ duties and obligations as provided by the Companies Act 1965 (CA) are comprehensive in addressing the scandals. Auditors are under a duty to audit the company. Nevertheless, if the duties and obligations of auditors are minimal, eventually, the use of a company to do business will be misused and abused. The duties and obligations of auditors must be expanded for the sake of capital market, stability of financial and economic sector and the rights and interests of those persons and bodies mentioned earlier. A higher audit quality will provide better information to investors and thus generate a more efficient investment. There must be a modern approach to the auditors’ duties and obligations in... [continues]
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