1. ‘There is a closer relationship between company management and auditors than between the latter and shareholders. Both parties are actively involved in the corporate financial reporting process.’...

1. ‘There is a closer relationship between company management and auditors than between the latter and shareholders. Both parties are actively involved in the corporate financial reporting process.’ Discuss this statement.

2. In view of the complexity of the modern corporation and the increased demands for corporate accountability, the auditor’s role has grown in importance. The financial crises of recent years involving auditors raised concerns about their role, their responsibilities and the extent of their independence in corporate reporting. Auditors as the independent third party have a key role to play in ensuring the accountability of directors and management. Discuss the following issues with regard to the auditor’s responsibilities:

(a) What is expected to be the auditor’s role, and what difficulties do they have in carrying it out?

(b) The responsibilities of external auditors in corporate financial reporting go beyond the audit report addressed to the board and/or general meeting. Discuss auditors’ responsibilities to communicate their consideration of the risk of material misstatement due to fraud and illegal acts. Consider these responsibilities towards the audit committee and appropriate regulatory agencies.

(c) Consider (a) and (b) with regard to the regulatory changes made for publicly listed companies in your own country.