1. generally accepted auditing standards new principles

1. GENERALLY ACCEPTED AUDITING STANDARDS NEW PRINCIPLES PROFESSIONAL

Hopefully, these insights can inform future debates about the level and types of standards that are appropriate for the auditing profession. In the end, standards overreach may undermine the economic value of the audit to many stakeholders and lead to fee pressure for audit firms. However, I also present a number of observations about what standards should not try to do: Standards should not (1) discourage the use of judgment by auditors (2) limit the potential demand for economically valuable alternative levels of assurance (3) lead to excessive procedural routine or standardization in the conduct of the audit and (4) be set based on an enforcement agenda.

1. GENERALLY ACCEPTED AUDITING STANDARDS NEW PRINCIPLES PROFESSIONAL

More specifically, I present a number of observations about what standards can do: Standards can (1) compensate for the lack of observability of the audit outcome by focusing on the audit process (2) partially mitigate the information advantage possessed by the auditor as a professional expert that might motivate the auditor to under-audit (3) counterbalance the diversity of demand across multiple stakeholders that might drive the audit to the lowest common denominator and create a market based on adverse selection and (4) provide a benchmark that facilitates the calibration of an auditor's legal liability in the event of a substandard audit. While this conclusion may not come as a surprise, the conditions under which standards may, or may not, have a desirable effect on audit quality are less obvious. In this essay, I observe that auditing standards are most important when an auditor may have an incentive to under-audit. Properly understanding the economic role of auditing standards is an important step toward improving both audit effectiveness and efficiency.

Journal of Forensic Accounting Research Teaching Notes.

Journal of Forensic Accounting Research.

The Journal of the American Taxation Association.

Journal of Management Accounting Research.

Journal of International Accounting Research.

Journal of Information Systems Teaching Notes.

Journal of Governmental & Nonprofit Accounting Teaching Notes.

Journal of Governmental & Nonprofit Accounting.

Journal of Emerging Technologies in Accounting Teaching Notes.

Journal of Emerging Technologies in Accounting.

Current Issues in Auditing Teaching Notes.

AUDITING: A Journal of Practice and Theory.

Issues in Accounting Education Teaching Notes.

In all cases where an auditor's name is associated with financial statements, the auditor should clearly indicate the character of the auditor's work, if any, and the degree of responsibility the auditor is taking, in the auditor's report. When the auditor cannot express an overall opinion, the auditor should state the reasons in the auditor's report.

The auditor's report must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed.

If the auditor determines that informative disclosures in the financial statements are not reasonably adequate, the auditor must so state in the auditor's report.

The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.

The auditor must state in the auditor's report whether the financial statements are presented in accordance with generally accepted accounting principles.

1. generally accepted auditing standards new principles