ACCA AA Syllabus A. Audit Framework And Regulation - Mechanisms for Regulating Auditors - Notes ^{2 / 8}

Normally an external auditor has to be a member of an appropriate ‘regulatory body’, such as the ACCA.

Ok so what do these bodies do?

Good question my little black and white beauty.. well they..

• Offer professional qualifications

• Provide evidence of technical competence (unless you're one of those idiot f8 students :P)

• Make sure the competence is maintained

• Make sure only ‘fit and proper’ persons, who act with professional integrity can be an auditor

• Make sure their members use appropriate technical standards (for example, ISAs)

• Monitor compliance by its members with the rules of the regulatory body

The alternative is regulation by government.

The government may establish rules and procedures to do all the work the regulatory bodies do now

Well, The US government has got involved over there

They introduced the Sarbanes-Oxley Act of 2002.

Similarly Canada with a national inspections unit

And the EU commission recently stated.. "Self-regulation is not sufficient to address the independence issue, both in terms of independence of statutory auditors from the audited entity, and in terms of independence of the supervisors of the auditors from the latter.

"The crisis has also shown that self-regulation is not adequate when looking towards the future."

Leaving the profession to investigate and regulate itself could be seen as a conflict of interest, but equally it could be seen as being the most practical solution as they understand the situation better