Controversies Behind Accounting and Audit Profession Essay

Controversies Behind Accounting and Audit Profession - Essay Example To prevent accounting fraud, many literature states that it is common for the body of institutional investors to act as the company's monitors. (Chen, Harford, & Li, 2007; Chung, Firth, & Kim, 2002) Therefore, it is possible that fraud firms have a low level of institutional investment before committing fraud due to the fact that these companies lack effective accounting monitoring.For this study, the researcher will compare and contrast the management's responsibility for an entity's financial statements with the auditors' responsibility for detecting fraud and error follow by evaluating the most recent suggestions made by the Audit profession in respect with the auditors responsibility in detecting fraud. The researcher will also discuss about the audit expectation gap as well as the factors that contributes to the increase of the audit expectation gap. The researcher will also examine whether the audit expectation gap is similar to the accounting expectation gap. Prior to the main discussion, the researcher will provide some strategic ways on how auditors could reduce the gap on audit expectations. Compare and Contrast Management's Responsibility for an Entity's Financial Statements with the Auditors' Responsibility for Detecting Fraud and Error Using the generally accepted accounting principles in UK, the top management behind a company is responsible for the preparation of financial statement based on the highest integrity, objectivity and clarity. (Price, 2002) As part of the management's responsibility in developing an accurate financial statement, the top management should ensure that the company hires and trains qualified employees to work behind the establishment and communication of the company's accounting policies and procedures. Since businesses are more concerned with the company's profitability, there is a higher chance for top management to manipulate the company's financial statement. In order to lessen the incidence of accounting fraud and misrepresentation of the accounting figures, there is a strong need for each company to hire the service of an external auditor to perform the auditing of the company's financial statements. The main responsibility of the auditors is to ensure that each company submits an accurate financial statement1 by detecting any possible accounting fraud or errors based on the current United Kingdom Law and Accounting Standards known as the United Kingdom Generally Accepted Accounting Practice. (Ernst and Young LLP, 2007) In relation to determining whether the company practices accounting procedures, auditors are responsible to follow the relevant legal