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Essay / Research Paper Abstract
A 5 page paper discussing the continued relevance of the audit and auditor for stakeholders in today's business environment. Perhaps the greatest value of the auditor is as the entity insisting on uniformity over time. This position also keeps the auditor in the position of "watchdog" rather than "bloodhound." Auditors may or may not be able to uncover intentional deception, but their role in ensuring uniformity over time is valuable to all stakeholders, particularly investors. Bibliography lists 7 sources.
Page Count:
5 pages (~225 words per page)
File: CC6_KSauditVal.rtf
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Unformatted sample text from the term paper:
tendency for managers to want to present their businesses in the most favorable light possible. Certainly there are many financial incentives for presenting glowing reports to stakeholders, particularly investors
whose capital the public company craves. At a 2000 corporate governance conference hosted by the Federal Reserve Bank of New York, then-current Securities and Exchange Commission (SEC) director Arthur
Levitt stated in the keynote address that "No market has divine right to investors capital," that it is the responsibility of organizations to ensure that their financial reporting is full,
fair and unbiased. Despite long-term attention to the issue of bias, there have been many instances in recent years in which auditing appears
not to have been effective. Those are well known cases, however, the ones that make national news. There are many more in which auditing turns back or restates
biased information before it is made public. The Auditors Role Kinney and Martin (1994) conducted an extensive study of "9 data sets of
audit-related adjustments from more than 1500 audits across 16 audit years" (p. 149) for the purpose of determining how audit adjustments affected the final reports of the companies involved.
Changes that were required as a result of audit findings were found to have "an overwhelmingly negative effect on preaudit net earnings and net assets" (Kinney and Martin, 1994; p.
149). The size of this negative effect was more than only significant. The average aggregate adjustment in this study reduced earnings and
assets by two to eight times the minimum level established as the boundary for requiring restating results. In light of these findings, Kinney and Martin (1994) concluded that the
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