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 system
  • 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
  • auditors and financial professionals doing what was minimally required and actively fighting tighter standards
  • confusion over who the auditors work for
  • auditors delivering services to clients that impaired independence