Audit Legislation Research Articles

Audit activity: some issues of law enforcement

The article considers the legal status of the auditor as a subject of the services market. The concept of audit activity development is characterised; the main novelties of the legislation regulating audit activity at the present stage are highlighted. Attention is drawn to the transformation of the approach to the content of audit services as a basic category of audit legislation. The expediency of expanding and clarifying the subject of the audit, the formation of criteria for a mandatory audit, the problems of related services, as well as tax consulting as a related service of the auditor are analyzed.

Analytical procedures during the audit of segment reporting and new facts in the audit legislation

Analytical procedures during the audit of segment reporting and new facts in the audit legislation

The ‘Rebirth’ of the EU as an Audit Legislator

In April 2014, important new audit legislation was adopted by the European Parliament and the Council, i.e. the 2014 Auditing Directive and the PIE Regulation. In the author’s opinion, the role of the EU as an audit legislator has significantly changed over time. More specifically, the new audit legislation indicates the ‘rebirth’ of the EU as an audit legislator. The article focuses on the role of the EU as an audit legislator, even though the EU also has an important role to play as an accounting legislator. The most important legislative acts when it comes to EU audit legislation are discussed. A number of important trends in EU audit legislation are also identified and discussed. These include an increased legislative focus on Public-Interest Entities (PIEs), a change from a ‘directive only’ to a ‘directive and regulation’ legislative paradigm, a legislative change from the ‘periphery’ to the ’core’ of auditing, ‘codification’ of provisions from the International Standards on Auditing (ISAs) in EU legislation as well as a discussion on a possible EU adoption of the ISAs. Auditing, audit legislation, 8th directive, green paper, financial crisis, auditing directive, pie regulation, public-interest entities (pies), international standards on auditing (ISAs)

‘Future Trends in Auditors’ External Reporting: Inspiration from the UK?

For the time being, the International Standards on Auditing (ISAs) and, for Public-Interest Entity (PIE) audit reports, the PIE Regulation constitute the regulatory foundation for audit reports within the EU, together with the national act in each Member State that implements the Auditing Directive and with any other relevant national legislation or regulation. However, further changes to auditors’ external reporting may lie ahead. The purpose of this article is to discuss these possible changes. The article focuses on the UK, where a number of important and possibly ‘game changing’ reports have recently been published – especially following the collapse of Carillion. Admittedly, after Brexit, the UK will of course no longer have a direct influence on EU legislation, including audit legislation. However, there is reason to believe that the UK will remain one of the ‘driving’ countries within auditing and UK hence continue to exert significant influence on audit regulation. Besides a brief description of Carillion and its collapse, the article discusses the Kingman Review and the Brydon Report, which both include interesting considerations on auditors’ external reporting. Only time can tell which changes will actually be implemented, how, when and not forgetting where. Auditing, Auditors, Audit Legislation, Auditing Directive, Public-Interest Entities (PIEs), PIE Regulation, International Standards on Auditing (ISAs), Audit Reports, Key Audit Matters (KAMs), Carillion, Kingman Review, Brydon Report, Company Law, UK Companies Act

Audit Reports – Balancing Harmonisation, Standardisation, and Customisation

The purpose of this article is to discuss the increased harmonisation of the rules on audit reports across Member States caused both by EU legislation, i.e. the Auditing Directive and the PIE Regulation, and the International Standards on Auditing (ISAs). All things being equal, this harmonisation of the rules on audit reports across Member States, of course, entails increased standardisation of audit reports across companies but, interestingly, for PIEs both the PIE Regulation and the new and revised audit report ISAs also entail increased customisation of audit reports between companies. At first sight, this customisation of PIE audit reports between companies seems incompatible or inconsistent with the general standardisation of audit reports across companies. However, the article shows that this, in fact, is not the case. Pursuing this purpose, the article identifies and discusses three overall audit report trends: (1) increased harmonisation of the rules on audit reports across Member States; (2) increased standardisation of audit reports across companies; and, for PIEs, (3) increased customisation of audit reports between companies. Auditing, Audit Reports, Audit Legislation, Auditing Directive, PIE Regulation, Public-Interest Entities (PIEs), International Standards on Auditing (ISAs), Key Audit Matters (KAMs)

Comparative Study on the Organization of Internal Public Audit in Albania and Romania

The audit process has progressed and improved with the economic and political development of each country as response to the challenges of society and politics in each country and as result of the global changes' effect. The purpose of this study is to analyze the development of the audit concept and to study the main factors influencing the internal audit legislation in Albania and Romania. The research aimed to highlight some aspects of theory about how the internal audit has emerged in Albania and Romania, and to provide an overview of the differences and similarities of the two legislations on public internal audit. A detailed comparative study of the laws of both countries has concluded that Albania's legislation needs to be revised, as there are some issues that are not fully covered by the law. Efforts to improve the internal audit activity are numerous, but much remains to be done. Although Romania has a more comprehensive and detailed internal audit law, both countries need to strengthen the enforcement of legislation. For a reasonable use of public funds, the authors advocate the imposition of restrictive/blocking mechanisms or procedures for entities that do not comply with the legal provisions on internal audit.

Проблемы проверки на плагиат статей студентов экономических специальностей, направлений и программ обучения

The article deals with the issues of the quality requirements of the content of scientific articles of students of economic universities, represented for participation in scientific conferences, subject to a high percentage of the uniqueness of the text. The idea of this article is to get an answer to the most important question: what can a student write today, only mastering the basics of the profession, studying various courses provided by the curriculum, forming their professional competence, on any chosen topic of research, observing the established standard of uniqueness. On the example of articles on the problems of taxation, accounting, auditing, the impossibility of ensuring the semantic content of the text without the use of a large number of legal sources, and, therefore, the inadmissibility of the installation by universities of any percent of uniqueness, acting as a criterion for the quality of the article. The main task of higher education, according to the author, is to teach the student to determine the topic of interest, highlight unresolved problems in the context of this topic, find and group available in the economic literature approaches to its solution, to analyze existing proposals and recommendations for compliance with current tax, accounting and audit legislation, taking into account the specifics of the object of study.

KÜRESEL BİR BAKIŞ AÇISIYLA TÜRKİYE’DE İÇ DENETİMİN GELİŞİMİ

Bu çalışmanın temel amacı, iç denetimin Türkiye’deki gelişimini gözlemlerken, aynı zamanda iç denetim mekanizmalarının küresel boyutta geçirdiği evrelerle de bu gelişimin etkileşimini incelemektir. Bu nedenle, akademisyenlerin, enstitülerin (IIA), iç denetim işini fiilen yapan kişilerin ve kurumların literatüre farklı açılardan bakmalarını sağlaması ve teori ile uygulama kapsamındaki faaliyetleri karma bir şekilde değerlendirmesi bakımından, çalışma ayrı bir önem taşımaktadır. Küresel ölçekteki iç denetim faaliyetlerinin dünden bugüne nasıl şekillendiği, temel nedenler ve varsayımlar ile yapılan literatür incelemelerinin ışığında derinlemesine bir yaklaşım ile araştırılmıştır. Örneğin, tarihte iç denetim faaliyetlerinin kökleri milattan önce üç bin beş yüz yılına kadar uzanmaktadır. Öte yandan, iç denetimin Türkiye’deki geçmişi ise, on altıncı yüzyılda Osmanlı İmparatorluğu’nun muhasebe kayıtlarını kontrol etmesine kadar dayanmaktadır. Daha sonraları, 1860 yılında Osmanlı İmparatorluğu’nda Mektup ve Telgraf Hizmetleri için ilk denetim birimi kurulmuştur. Sonuçta, Türkiye, son yıllarda pek çok alanda bir değişim ve gelişim sureci içine girmiş ve özellikle mali sistem alanında gelişmiş ülke düzeyine ulaşabilmek için gerekli yasal ve yapısal değişimleri gerçekleştirmek için büyük çaba sarf etmektedir. Bu durum, iç denetim alanında da sonuçlarını göstermiş ve iç denetim mevzuatında ve uygulamalarında önemli değişimler olmuştur. Özellikle, 2000’li yılların başında itibaren Türkiye, uluslararası alanda meydana gelen bu değişimlere ayak uydurmak ve değişimleri ulusal düzeye adapte etmek için, kurumlar seviyesinde iç denetim standartları geliştirmiş ve bu çerçevede yasal düzenlemelere gidilmiştir.

Assessment of Approximation of the Present Company, Corporate Governance, Accounting and Auditing Legislation and Existing Practices in Ukraine to EU Standards and Practices

The purpose of this Study is to review the Ukrainian legislation and practices on company law, corporate governance, accounting and auditing and to examine its current compliance level with the EU law requirements and standards. The Study also provides an update on the main changes in the respective sectors in 2014. Legal developments is a phenomenon that rarely occurs linear. Times of rapid changes are alternated with times of stagnation, reforms are followed by the times of digest. Ukrainian law does not deviate from this pattern. A few points in time over the last nearly 25 years have marked milestones in the process. These points in time are 1991 – the enactment of the Law on Business Association, 2004 – the adoption of Civil Code and Economic Code and 2008 – birth of the new Law on Joint Stock Companies. Now a new impulse for law reform became topical and politically valid: under the Association Agreement between the European Union and Ukraine that was signed in 2014 Ukraine undertook a legal obligation to bring its legislation in line with the requirements of the EU law. This Study contributes to the part of the Association Agreement concerning the company law, corporate governance, accounting and auditing. The global objective of the Study is to improve business climate in Ukraine by aligning its company, corporate governance, accounting and audit legislation with the EU standards and practices. The Study presents the assessment of current approximation level of relevant legislation of Ukraine to the EU Acquis as well as provides recommendations for its further harmonization. In addition, the Study reaches out to national jurisdictions of some European countries as well as to the US and attempts to learn from their corporate law reforms.

This Is Not America: The Impact of the New EU Audit Regulation in Slovenia

The article presents problems that could arise in a small European country with a modest number of public interest entities and weak market competition due to the new European audit legislation. In this framework, special attention is paid to the effects of the extended requirements to audit public interest entities, public oversight of the audit profession, and adoption of the international auditing standards. The author points out those fields where the European Commission’s further action could make the legislation more proportionate in terms of the size of the country and its capital market development. DOI: 10.15458/85451.23

Significant reforms in public sector audit – staying relevant in times of change and challenge

Purpose – This paper aims to talk about the changes to auditing practice in the context of broader changes in the public sector. Design/methodology/approach – A personal reflection on the issue using prior experiences as a former auditor-general of two Australian states. Findings – The role for government audit will always mirror the change in the public sector. Whether audit fulfils this role depends on having the right legislation and the right approach. While audit legislation lags behind recent shifts in public sector approaches, government auditors are continuing to explore new ways to give parliament, as well as the sector, authoritative opinions and commentary that is relevant and valuable. Practical implications – Increased understanding of the changing role of the Auditor-General's Office that affects the efficiency and effectives of public sector entities will help practitioners in improving strategic directions of their operations. This will also help academic researchers in developing ideas for future research. Originality/value – Reflections presented here are based on the author's practical experiences over the past 40 years as a program manager and as a government auditor.

The impact of guanxi on auditor independence: Perceptions of auditors and CFOs in Hong Kong

Auditor independence has long been referred to as the cornerstone of the auditing profession. Guanxi refers to the networks of informal relationships and exchanges of favors that dominate all business and social activities that occur throughout China. This research will analyse the impact of guanxi and client size on the perceived independence of auditors in the setting of Hong Kong. Survey data is obtained from 524 questionnaire responses from Chief Financial Officers (CFOs), Big 4 and Non-Big 4 auditors. Two within-subjects independent variables: “guanxi” and the “client size”, and one between-subject independent variable: auditors versus CFOs, are employed. Results indicate guanxi is a significant factor influencing perceived auditor independence in Chinese society, which has largely been neglected in the accounting literature. Independence is severely impaired when the duration of guanxi with clients reaches five years or more. Large client size has a negative influence on the perceived independence of auditors and this result contradicts an earlier U.S. study. The results indicate that the longer the guanxi when the auditor is associated a with large audit client, the greater the decrease in their perceived independence and this has implications for audit legislation. CFOs generate the lowest mean scores (greatest threat to auditor independence) for the perceived effects of all levels (durations) of guanxi among the three groups. This result supports the stewardship theory that asserts stewards (CFOs) motives are aligned with the objectives of their principals. CFOs consider the increasing levels of guanxi associated with the auditors are not in the best interests of their principals, and hence affect the reliability of the audited accounts. Though this study is conducted in the Asia Pacific region, western counterparts will find the results useful. Multinational corporations which have subsidiaries or headquarters established globally, should be aware that guanxi has implications for their Asian operations and their consolidated audited accounts. In view of the critical importance of the guanxi factor on the perceived auditor independence, standard setters in this region should consider devising ethical guidelines requiring mandatory rotation of public accounting firms.

STATE ADOPTION OF ENVIRONMENTAL AUDIT INITIATIVES

This article examines the factors that affect state adoption of environmental audit legislation and self‐policing policies. The results of both a cross‐section probit and a Weibull proportional hazard model suggest that political context and state–federal relationships are key factors in adoption decisions while environmental conditions are less significant and institutional capacity is the least important. Overall, the results for audit privilege and immunity legislation are very similar, but several explanatory factors affect adoption of audit legislation and self‐policing policies in opposite ways. Finally, these results also suggest that EPA opposition to audit legislation has had a significant deterrent effect. (JEL D78, Q28, K32)

The Politics of Accountability: Institutionalising Internal Auditing in Israel

Israel’s attempt at strengthening public sector internal audit is found to have limited success, conforming with experiences of other countries. The adopted internal audit policy had little more than symbolic value, being devoid of stipulations to affect significant change. This is confirmed by implementation data that reveal low scores for most organizations across dimensions of structure, process and outcome. Politics of accountability and policy change models help to explain the causes of ineffectual internal audit legislation and of weak implementation. Findings suggest that top–down approaches to strengthening public sector internal audit are misplaced.

The development of the role of the audit in the Czech Republic

As the economies in Central Europe have commenced their transformation from centrally planned to market-led economies, each country has implemented a new legal framework for accounting and auditing. This provides a unique opportunity to research the implementation of aspects of accounting and auditing well known to Western market economies into different economic contexts. In particular, it provides an opportunity to revisit the role of the independent audit. This paper contributes to the research on the developing of auditing in Central Europe by analysing the role of the audit in the Czech Republic. It covers aspects of both regulation and practice and, in order to gain more understanding of how the audit role is developing in the Czech Republic, focuses on three areas: influences on the Czech audit legislation; the position of the audit report and perceptions of the objectives of the audit in the Czech Republic. After a brief review of the published literature on accounting and audit in the Czech Republic, the paper studies some of the country's recent economic and legislative developments in relation to auditing. These developments are put into the context of auditing before and after the ‘Velvet revolution’ of 1989. The paper then concentrates on the influences on the development of Czech audit legislation by comparing aspects of the Czech audit legislation with the German and UK equivalents. This comparison highlights some anomalies in the Czech legislation. The Czech audit legislation is then put into the local context based on a review of the contents of the audit report and its publication with interviews among a selection of users and preparers about how the audit is perceived.

Debating Spanish audit legislation: the audit law of 1988

In 1988 Spanish politicians enacted legislation to adapt national audit practices to the European Community's Eighth Directive. The 1988 Audit Law was debated extensively in Spain's Congress of Deputies. Excerpts from the political exchanges are employed in the paper to address two issues. First, the debates give some indication of the ways in which the politicians wrestled with the details of the legislation in order to establish a future audit framework considered appropriate for Spain. The paper can be considered, therefore, as an attempt to contribute to a more fuller understanding of one nation's efforts to implement EC Directives. Second, the issue of understanding the changing of Spanish audit legislation is examined from a further perspective. Both the political debates and specific details of the Audit Law are used as a basis for reconsidering one aspect of other work (García-Benau and Humphrey, 1992) which examined the same legislative changes. Whereas their analysis suggested to them a certain ‘innocence’ as regards Spanish attitudes towards the potentialities of financial reporting, our material questions the generality of such a conclusion.

The US Needs National Independent Audit Legislation—A Comment on the Accounting Professions's Participation in the Saving and Loan Debacle

The accounting profession's attempt to avoid independent audit responsibility in the S&L debacle indicates the need for national independent audit legislation.