Legislation and Standards Term Paper

Pages: 12 (3734 words)  ·  Bibliography Sources: 10  ·  File: .docx  ·  Level: Master's  ·  Topic: Accounting

Issues of legal protection, like the degree of recourse given to creditors of investors who have been hurt as a major aspect of the nation's regulatory and legal framework might affect the audit. In the business world where investors have limited authority of the resource, it might expedite the creation of a dominant position for management to impact or miss-use their position, distort the assessment of liabilities, and override controls (Bode, 2007).

Implicit in standards

A nation's norms and values may not be consistent with those that are implied in worldwide standards. The dangers of ISAs have recently been recently highlighted based on philosophy and illustration of the diversity of auditing in some nations. Similarly, while this paper does not explicitly address implicit cultural biases in standards, a few nations may have troubles with their implementation. Distinctions in the cultural attributes of auditors may especially influence auditors' requisition of ISAs to multinational teams (Gramling & Rittenberg, 2014).

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Although the adoption and adaption of ISAs is frequently encouraged. This endeavors to create and make auditing uniform and universally homogeneous. However, contrasts between the non-local and enormous global, and the diminutive indigenous audit firms cannot be eliminated. There might also be contrasts between local assumptions and those epitomized in the accounting standards applied at a combined level. This may influence the application of accounting standards and the capacity of individuals in roles of finance to utilize expert judgment, which in turn might expedite contrasts in financial reporting practices and the inappropriate accounting treatment and transaction classifications (Bagshaw, 2013). For instance, if IFRS is to be utilized, this may be conflicting with, or not sufficiently upheld by, local laws and regulatory structures, or a multinational team might have locally employed staff without the level of experience and knowledge required for purposes of group reporting and additionally for local filing requirements.

Quality of record keeping

Term Paper on Legislation and Standards Affecting Assignment

Auditors may have accurate accounting records to be used in auditing for various reasons pertaining to the national reporting environment, for instance:

I. Lack of suitably experiences and qualified workforce or financial expertise in the audited entity

II. A culture of mechanistic book keeping whereby transactions are recorded based on form instead of substance (Weirich, Churyk & Pearson, 2012).

The cultural complexity and characteristics of businesses relationships and structures may also affect the details and completeness of accounting records in auditing entities. In some nations, business associations might be conducted on a minimally formal ground than others. Agreement terms may be vague. The ultimate determinants of the business outcome of an agreement may be the relationship of trust between the partners but not the writings on the papers. In some cases, trading among family members may be common, and some auditors may rely on this. Oral agreements may also be made. The absence of formal documentation leads to problems for auditors in terms of obtaining adequate appropriate audit evidence and risk assessments (Singleton & Singleton, 2010).


Because of the need to apply expert judgment and skepticism on audits, auditing has become more of an art than a science. As an art is dependably the result of an individual artisan, the audit process too will be influenced by the distinct characteristics of auditors. Hiring auditors with the appropriate financial expertise may be troublesome in nations with poor education frameworks with constrained cross-border exercises, communication and chances to acquire significant experience and financial literacy skills (Wright, Freedman & Liu, 2008). The nature and success of audits performed may be affected in case of the limited training facilities to share experience with knowledge and advance these vital skills. Even without those issues, a poor attitude of the profession of auditing may imply that a career in auditing does not draw in enough high caliber applicants. This may be the case when discernment fosters the understanding that auditing is practically ticking boxes, adhering to regulations, and not adding quality to organizations. Auditors play a critical role at this point by ensuring that the information they provide is understandable and worthy the investment (Wright, Freedman & Liu, 2008).

In some nations, auditors may fail to agree about making judgments and being suspicious where the principle-based culture exists. The process has dependably been more critical than outcome and dependability more essential than relevance. Utilizing Hofstede's cultural dimensions, auditors in countries of high uncertainty avoidance, where rules are predominant may be less sure about making judgments dependent upon standards than auditors in low uncertainty avoidance nations. This may have a huge impact on the level of work viewed important by auditors (Weirich, Churyk & Pearson, 2012). The cultural background of auditors will influence their perspectives on the adequacy of transactions and offer ascent to national dangers to global consistency in audit quality. Similarly, there may be distinctions in the methodology of auditor independence and the established and acceptable cultural presumptions accompanying the reasons for the audit. There may be cultural roadblocks to communication like the adequacy of an audit group member approaching the engagement partner with an issue or concern (Bagshaw, 2013). While appreciating the significance of correspondence in the audit group, various ISAs includes various requirements for examination in the engagement group. In case the audit team members are not incentivized to raise issues or when culturally considered inappropriate, it might be challenging audit firms to adhere to all the requirements in ISQ 1 and ISAs (Wright, Freedman & Liu, 2008).

International Standards on Auditing

The IAASB's reference terms have confirmed that ISAs are created to improve the quality and consistency of audit practice globally. ISAs require auditors to acquire sensible confirmation whether financial comments are free from material misstatement. In case of error or fraud, this creates the foundation of the auditor's opinion. An essential feature of ISAs is their danger-based approach to auditing. The ISA 315 is relevant in this circumstance because it sets out the prerequisites for assessing and identifying risks of material errors by comprehending the institution and its environment (Knapp, 2013). Such a methodology is altogether different on how a few audits may have been performed in the past in a few nations. This does not relate to the ticking boxes and the running down of strategies. It requires true judgment where a distinctive work will be performed for diverse sorts of organizations in distinctive environments. This philosophy might not be easy to follow. Auditors need to be familiar with the risks emerging from distinctive environments. Some characteristics of national environments are not explicitly addressed in ISAs. They affect the way ISAs are applied and auditors' interaction with audited institutions (Knapp, 2013).


This paper has identified and raised awareness about the risks to audit quality arising from national differences. The research has drawn on the most relevant academic research. The Little academic study focuses directly on the issues of how national diversities contribute towards the differences in audit quality. In support of national differences in audit, the paper has recognized that research and academic might make a crucial contribution by identifying effective ways of sharing global experience, exploring linkages between broader issues of economic development and audit practices, and analyzing how global standards should recognize national differences (Moeller, 2009).

A wider global adoptions and implementation of IFRS has of late led to a massive expansion of academic research into global comparisons of the importance of financial reporting. Evidently, the regular IFRS platform facilitates such comparisons. As such, we remain optimistic to see a similar phenomenon in the area of audit research (Singleton & Singleton, 2010). As countries across the world are increasingly adopting and implementing IAASB standards and thus establishing a shared quality benchmark, there is a likelihood of more scope for both quantitative and qualitative research to analyze the magnitude at which national difference impact audit quality (Knapp, 2013). The implementation of IAASB standards must give new and more comparable data on issues like audit report modifications and qualifications, audit costs, published results of assurance regimes of audit quality and the experiences of financial preparers and auditors pertaining to the audit process. Conducting a qualitative research in this field may prove somehow challenging but will be imperative. Such a study ought to be ultimately useful to investors, auditors, standard setters, businesses, and regulators (Wright, Freedman & Liu, 2008).


Promote the role of audit

Later years have seen another emphasis on the importance and inter-reliance of establishments in financial development exemplified by the North's book, "Understanding the Process of Economic Change." In this connection, the establishments involved practices like auditing organizations. Consequently, actualizing worldwide auditing standards with constrained institutional foundations in a nation to supplement and underpin them will be extremely challenging. Auditors confront challenges of issuing clean audit reports. This cannot be solved by imparting knowledge or recognizing national distinctions inside standards: it might show that there are more extensive issues that have to be addressed if the nation is to attract global investment (Gramling & Rittenberg, 2014). Issues relating to the political and commercial situation systems will also be addressed. Distinctive institutional models may work… [END OF PREVIEW] . . . READ MORE

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