Accounting and Financial Information: An Expanding Audit Role and its Impact on Corporate Governance and Fraud
This paper reviews the current position on the role of external audit in maintaining effective corporate governance. The general assumption in the teaching of the role of audit is that the design of an audit programme is dependent upon the extent to which internal control is effectively maintained by directors. However there is little evidence to support the view that this will have an impact on the reliability of the audit opinion. The extension of audit to encompass an evaluation of internal control procedures (as required in Europe and the US) is an understandable outcome of major corporate collapses but it does serve to extend further the need for the audit profession to define what is auditable and then to use that as a proxy for good governance. The problem increases as the focus of an audit moves further towards evaluation of organizational capability and broader social and environmental responsibilities. However it is the auditor’s responsibility for considering the possibility of fraud in the preparation of financial statements which will provide a major focus. The paper will demonstrate that audit involves a series of assumptions made by the users and preparers of accounting statements as well as the auditors, and will suggest concerns about the way audit impacts on organizational performance.
Fred Hutchinson has worked with Teesside University Business School for over 20 years. He is currently Principal Lecturer in Accounting and School e-learning coordinator, but has held several roles including the first director of the Centre for Fraud and Financial Crime. Prior to entering academia, Fred was a senior manager in the NHS finance and in local government. He continues to research in these areas and he has worked with several organizations and audit bodies. He also has contacts with social housing organizations, having been a non-executive director to a major housing provider. His other research interests are in social reporting and public finance.