As international trade grew
with the opening of trade
and commerce, companies and financial
organizations started looking out for different sources to raise finance. This
created awareness amongst different participants. The increased
reliance was not confined to the growth process but also
ameliorated investor's access to the audited accounts of the
entities which had to be audited by an auditor. With the passage of
time, the customers' reliance on the audited data to make
investments increased which, in turn, prompted the companies to
disclose more information.
However, of late, the auditor's role has been questioned with
the failure of all the big organizations like Lehman Brothers,
Bear Stearns, Wachovia Bank and Satyam Computers. The
answers to these failures lie in understanding the auditor's role and in
analyzing how far they have been successful in checking the
functioning of the organizations. An auditor's responsibility is to
ensure that the accounting standards laid down are strictly
followed. External auditors must investigate, discover and form
independent, unbiased and meaningful opinion about a company's
financial statements. Various national and international
bodies have laid down the standards and guidelines for improving the
effectiveness of the auditor's role. These standards have been
laid down by international organizations like the International
Auditing and Assurance Standards Board (IAASB) on auditing,
the International Accounting Standards Board (IASB) on
accounting, etc., so that the awareness level among the member
countries is increased and they would contribute to the quality of
reporting by the auditors. In recent years, the need for international
harmonization of accounting standards has grown considerably with
increased cross-border movement of
capital. Even in India the Institute of Chartered Accounts of
India (ICAI) has a comprehensive list of auditing standards, but
these standards lack the regulatory teeth. To bring in a more
transparent and creditable auditing system, especially in the aftermath
of the Satyam episode, the new Companies Bill aims to bring the
guilty audit firms accountable under law. Presently, the Companies Act
can only be disciplined under ICAI's code of ethics which has a
lower legal status than a law. |
