The Factors Which Changed Auditing Essay example

5749 Words Oct 10th, 2013 23 Pages
1. Introduction
“The only constant is change”, as Heraclitus points out ( There is no doubt that the world has changed over time physically, economically, and culturally. As the world has evolved, so has business, and as business has evolved so has auditing. The concept of auditing is as old as civilization. The need for a knowledgeable, external, third person to verify transactions or accounts and detect fraud has been present since the advent of trade and accounting. Thus the goal of auditing, in this sense, has not changed since. Teck-Heang Lee observed that “auditing serves as a mechanism to monitor conduct and performance, and to secure and enforce accountability (Lee 2008). All in all, an audit function plays a
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2. Factor A: The cycle of life (for the auditing profession) Frederick Douglas once stated “if there is no struggle, there is no progress” ( This quote especially applies to the auditing profession over the years in its fight to detect, disclose, and deter fraud. Joseph T. Wells highlights this struggle by stating “that for the last 80 years, untrained accounting graduates have been drafted to wage war against sophisticated liars and thieves” (Wells 2005). In the past, evolution of auditing progressed when the auditing profession responded to the needs of the business environment often using a “fire alarm” approach (Kinney 2005). This entailed a cycle in which a series of frauds are discovered, causing public outcry asking “where were the auditors?”, which often leads to a legislative response by either regulators or the self-regulated profession, and finally a change in auditing requirements such as new standards which must be considered in the future. This cycle has played a major influence on how the auditing profession has grown, how the role of auditors has changed, and thus how the auditing industry has evolved – especially during the last 40 years or so. It is through this cycle that the audit profession has grown and evolved as it responds to changes in society’s expectations regarding auditing. The following sections show how the cycle renewed in each of the last

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