The Roles Of Auditing And Assurance Services

1397 Words Dec 4th, 2014 6 Pages
Introduction
The role accounting firms played in the last financial crisis raised questions about the legitimacy of auditing and assurance services. Auditors, who are considered independent and are supposed to provide reliable information to financial statement users, played a major part in the financial institutions’ crisis. The role of auditing is not to stop management from making poor business decisions, but it is to make sure that those decisions are properly disclosed (Rapoport, 2010). However, auditors failed to fulfill that role while auditing some of the largest financial institutions, which led to a huge financial meltdown during the first decade of the 21st Century. As a result of the financial crisis, questions regarding the independence of auditors, the reliability and quality of audit reports have been raised. These issues could be addressed by the analysis of the auditors’ independence, audit deficiencies and the significance of the audit reports.
Auditors’ Independence
Auditors serve a critical role in the proper operation of public companies. Investors and creditors rely on external auditors to serve as gatekeepers who provide independent checks on management’s financial statements. The independence of auditors is perceived as essential; however, the lack of audit independence played a partial role in the last financial crisis.
The retention of clients by audit firms for many years may cause personal relationships between audit staff and companies’…
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