Discuss the advantages and disadvantages of auditing standards to auditors and the consequences of them being enforceable by statute. (5 marks)
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Advantages
(1) They give a framework for all audits around which a particular audit can be developed.
(2) They help to standardise the approach of all auditors to the common objective of producing an opinion.
(3) They assist the court in interpretation of the concept of ‘due professional care’ and may assist auditors when defending their work.
(4) They increase public awareness of what an audit comprises and the work behind the production of an audit report.
(5) They provide support for auditors in potential disputes with clients regarding the audit work necessary.
Disadvantages
(1) It may appear that they impinge on, rather than assist, professional judgement.
(2) They are considered by some to stifle initiative and developments of new auditing methods.
(3) They may create additional and unnecessary work and thus raise fees, particularly in the audit of small companies.
Consequences
If auditing standards were to be enforceable by statute it would mean that there would be government intervention in areas currently controlled solely by the profession itself. This might ultimately lead to a diminished role of self-regulation. To be enforceable by statute the standards would have to be applicable to all circumstance and thus need to be very general and broad in their instructions. This might reduce their usefulness to the auditors. Auditors might spend unnecessary time ensuring that they have complied with the law rather than considering the quality of service to their clients.
Finally, it should be considered whether full statutory backing for standards would force auditors into narrow views and approaches which might gradually impair the quality of accounting and auditing practices.