Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.6, 2013
Audit Practice in Global Perspective: Present And Future
Department of Accountancy, The Federal Polytechnic, Kaura Namoda, Nigeria. * E-mail of the corresponding author:email@example.com Abstract
This paper discusses the history of audit and its development particularly Enron and Worldcom scandals as some of the audit failures that increased the challenges of auditing firms to remain unbiased and independent of their clients. Secondary data was used to review the existing literature on the subject. Descriptive method was used to present the changes that occurred in the historical development of auditing. It traces the evolution of audit into a field of fraud detection and financial accountability to the advent of Industrial Revolution of 1750 to 1850 and states that as business increased in complexity, risk-based auditing makes auditing more efficient and economical than before. It highlights the global developments in audits. The author posits that as business environment gets more globalised and complex, auditing would be more challenging and the quality of the professionals involved in audit would be very important in maintaining audit quality. Keywords: Audit, Auditing, Historical Development, Audit Challenges, Accountants, Professionals. 1 Introduction
Audits are performed to manage and confirm the correctness of a company's accounting procedures. Auditing evolved as a business necessity once it became evident that a standardized form of accountancy must exist to avoid fraud. It has developed into a standardized yet complex field that is regarded as an important procedure in the management of business finance.
This paper discusses the history, development and future of audit. It is divided into seven sections. Section one introduces the topic by highlighting major audit failures in recent times. The historical development of audit at the global level and the Nigerian experience are discussed in section two. Sections three to five discusses the current audit practices while the major challenges of auditing were highlighted in section six. Section seven concludes the paper with an emphasis that though auditing as a profession is currently facing a lot of challenges but these are not insurmountable provided ethics of the profession is strictly adhered to and auditors are truly independent of their clients.
2 Historical Development of Auditing
The collapse in the US of Enron and Worldcom, together with their auditors, Arthur Andersen, has focused the public spotlight on the company audit and made it a highly controversial aspect of the accountant's work. In Britain, the recent legal action by Equitable Life against Ernst and Young is only the latest in a long line of scandals at BCCI, Maxwell, and the Barings bank, among many others. A History of Auditing for the first time lifts the lid off the work of the auditors, and details how historically they have got themselves into the present situation. The resulting history traces the evolution of the auditing process from its leisurely Victorian beginnings where armies of clerks checked and ticked everything in their client's books, to the transformation in the 1960s when, with the growing scale of clients auditing became more a matter of checking a client's systems rather than the records themselves. The changes in the 1980s are also documented when because of the growing pressure on audit fees from clients meeting the threat of global competition; auditors began to put their faith in such nebulous techniques as risk assessment. Alongside all these changes auditors also had to cope with the advent of computerization which robbed them of the audit trail.(Derek,2006) According to Tanko( 2011), auditing has its history to a large extent determined by the history of accounting, as the latter...
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