Accountability Environment

Accountability Environment

• The credibility of auditing and financial reporting has suffered in the last several years as a result of the accountability failures in the private sector.

• Forces that led to the corporate scandals and audit failures include:

  • Individual and corporate greed
  • Inadequate corporate governance systems
  • Ineffective regulation and oversight of the accounting and auditing profession
  • Inadequate accounting/reporting standards
  • Audit-related expectation gaps
  • Financial managers and advisors working to achieve certain reporting results and focusing on the legal form versus the economic substance of the transactions
  • Unreasonable and inappropriate executive compensation arrangements
  • Auditors and financial professionals doing what was minimally required and actively fighting tighter standards
  • Confusion over whom the auditors work for
  • Auditors delivering services to clients that impaired their independence