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As auditors they have more objectives over a company so the outcomes of their results must be well defined although have to be well verified. Most of writers criticize audit profession, in many ways auditing is only appropriate for large firms it may difficult to audit for small firms, and also the demerit of audit programme could be there is no revision in it. Business may expand or developed year to year, so audit must be changed according the changing circumstance According to sikka's argument there may be some drawbacks of audit profession, he argued that Auditors of banks unable tell the difference between a tent on Brighton beach or AAA security. They can be easy to judge the worth of management and allowed banks to show impact able assets and profit reports. Also he claimed that auditing can not protect stakeholder interest, because stakeholders mostly rely on company's effective and accurate reports, well organization of management and better improvement of company's progress. In some case auditors priority would be obtain money. So that the results may not represent the real situation of the company, therefore it may affect the stakeholder's interest.
For example if any biased information or either the information has inadvertently or fraudulently, after the checking has been done by the auditor. It will affect the company's future activities, because ofÂ this fraud company may loss their goodwill so it may lead to inflation, for instance In 2002, an especially fluctuation year , most of American companies caught up in major accounting fraud included some of them:Â AOL, Adelphia, Bristol-Myers Squibb, CMS Energy, Computer Associates, Duke Energy, Dynegy, El Paso Corporation, Enron, Freddie Mac, Global Crossing, Halliburton, Harken Energy, HealthSouth,Â Homestore.com, ImClone Systems, Kmart, Lucent Technologies, Merck & Co., Merrill Lynch, Mirant, Nicor Energy, LLC, Peregrine Systems, Qwest Communications, Radiant Energy, Tyco International, Waste Management Inc. and World Com.33Â most of these firms followed independent auditing in world wide. In 2002 there were about five major accounting firms. Most of these firms were mainly conducted by Author Andersen, the Enron auditor. 2005, KPMG has caught in fraud of over a multi-billion dollar tax fraud in the US finally they paid $456m. Adelphia, went bankrupt discovered that it had $2.3 billion in off-balance-sheet debt.AOL Time Warner misrepresented hundreds of millions of dollars in ad revenues finally they paid $510 million as fines. Bristol Myers Squibb illegally claimed $1.5 billion of income from sales to wholesalers and finally paid $150 million in fines.
Also auditors they are accountable to the shareholders so their obligation would be to provide fair and well verified information. Some case for auditors benefit they would misrepresent some information so it may not represent true story of the company. For example in India a company called satyam company which have done the similar fraud showed too much of fixed deposits in the document. Company unrepresented inflated cash and bank balance of 50.4 billion rupees also they submitted 26510 million instead of 2061 million. So in some case auditing is not appropriate for the society.
In the previous paragraph I mentioned the drawbacks and flawed auditing, so this Paragraph is going to contain the importance of audit profession and useful of auditing. Well as an organization they need to ensure the position of the company, so it may be helpful for company's future performances. Also the performance of the company should be favorable to the shareholders suppose the information is not favorable to stakeholders; they may loose their confident over companies. For the purpose of analyze and present the performance of the company a well prepared financial record is to be needed, therefore auditors are called. Auditors are accountable to shareholders therefore auditors have the obligation to provide the information effectively also the information must be fair and balanced. For organization and society auditing provide helps in many ways such as the feedback and the information that auditors provides are actually helps owners and stakeholders to be satisfy about the business operation to take decision in further also it could be helps for the company to discover the frauds and evaluate the performance of the company. Also most of outside investors and creditors will rely on auditor's reports which are verified by independent authority. If the business operations are successful, then it will ensure that stakeholders interest are highly protected such like employees have more confident and highly motivated on job security, increase in pay and job satisfaction, for consumers they have confident of good production and services, investors and creditors will confident of providing more loans to the companies. For that audit report is needed to evaluate the performance. Loans can be obtain through basis of auditing balance sheet, interest of the shareholders are well protected by the presence of audit and for state it becomes easy to impose tax basis of audit account. So audit not only a flawed profession also provides lot of helpful information to the society. For example there are lots of companies benefited by auditing such as Mc. Donald is a company did stakeholder auditing which succeeded in future, K.V enterprises, G.V manufacture.
In my conclusion auditing is a must for the company. Because of audition company can evaluate their performance even they could find what are weakness and strength of company's. Some auditors for their benefit misuse the influence of auditing. However in most case auditors are helpful for the company's development process. After the adjustment of rules and regulation in auditing profession there are fewer opportunities to do wrong audition. However the judgment rule require the management to focus on stakeholder's interest, so as a management they have the responsibility to make good decision and good care of company's activities. Therefore in audit fraud not only auditors fault but also the contribution of management of the company, without knowing management fraud can not be done through auditors. Mainly management is responsible for audit fraud.
http://books.google.co.in/books?id=VxliUGMyCn8C&printsec=frontcover&dq=witness+of+wrong+auditing&source=bl&ots=GZV01MSNrn&sig=67Kqt6Ex8nZMKl3z5s-Ljryz8Zk&hl=en&ei=AOr6TJTsJ8WHrAfC9qWwCA&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCQQ6AEwAQ#v=onepage&q&f=false fraud auditing and forensic accounting by Tommie.w.singleton and Aaron.j.singleton.