Audit regulation and policy making - Lecture 9

Question 1

What is regulation?

Answer 1

Regulation refers to the making and implementing of rules which direct or constrain behaviour

Question 2

Why is regulation important?

Answer 2

.Contributes to quality of audit services
.Keep up with the changing economies

Question 3

What are the key bodies involved in audit regulation?

Answer 3

1. International standard setters
2. Professional bodies
3. Government
4. Financial reporting council

Question 4

How do the international standard setters (IFAC and IASB) regulate auditing?

Answer 4

.IFAC = International federation of accountants
.IASB = International accounting standards board
.IFAC protects the public by encouraging best practice
.IASB develops enforceable and globally accepted standards

Question 5

How do professional bodies regulate auditing?

Answer 5

.Set and enforce standards of performance and conduct of members
.Arrange to ensure their audit qualifications meet the statutory requirements

Question 6

How does the government regulate auditing?

Answer 6

.Maintains legislative framework for audit regulation
.Companies act 2006
.Financial conduct authority (FCA) as a regulator for financial service firms

Question 7

How does the financial reporting council regulate auditing?

Answer 7

.Independent regulator
.Promotes corporate governance by setting standards
.Oversees the regulatory activities of the professional bodies
.Most of the powers in part 42 of the companies act 2006

Question 8

Regulation of the audit profession ensure that audit reports give…..

Answer 8

Credibility and provide assurance

Question 9

How have reporting scandals improved regulation?

Answer 9

.Increased global focus
.Development of corporate governance principles
.Greater government involvement
.Greater co-ordination of enforcement by the relevant regulators

Question 10

IOSCO (International organisation of securities commissions) developed a series of principles for regulators to ensure…….

Answer 10

.Effectiveness in protecting the public interest
.Without imposing unnecessary costs

Question 11

What is regulation about?

Answer 11

.Putting in place structures that produce appropriate rules and procedures for auditors
.Defining conduct or behaviour in terms of what it is, e.g. Moral or immoral, Ethical or unethical
.Professional behaviour - Integrity, objectivity