Current Issues in Auditing (3rd ed.)

Citation

Van Peursem, K.A. (1998), "Current Issues in Auditing (3rd ed.)", Accounting, Auditing & Accountability Journal, Vol. 11 No. 1, pp. 130-132. https://doi.org/10.1108/aaaj.1998.11.1.130.1

True to its title, Current Issues in Auditing (Sherer and Turley (Eds)) is an informative and, for the most part, very interesting read as to the current state of external auditing in the UK. The coverage of audit topics is wide and includes issues from market pressures and litigation to sampling and risk procedures. Divided into 18 chapters authored by a number of known academics and practitioners in the UK, the book is just over 330 pages of narrative divided in three sections ‐ The Framework and Context of Auditing, Forming an Audit Opinion and Special Contexts. Most chapters conclude with a substantial list of references and some discussion questions, presumably for class discourse.

A major strength of the readings is their incorporation of a wide range of views, knowledge and experience on audit issues. This depth of knowledge contributes a sound understanding to the changing nature, expectation gaps and anomalies of current practice. In Current Issues in Auditing paradigmatic differences from chapter to chapter highlight the acknowledged nature of the debate which, itself, surrounds audit:

It is quite clear that the auditing function is not a unitary phenomenon and can be taken as meaning different things to different people. There are a number of competing conceptual perspectives on the role and purpose of auditing and the nature of professionalism which portray some quite radically different scenarios of what can be expected of auditors (Humphrey, 1997, p. 24).

Included in the material is discourse which is critical of the coercive power and actions of the profession (e.g. Chapters 5 and 7) and, alternatively, that which appears more sympathetic to a regulation view of the auditor’s dilemma (e.g. the material generally found in Chapters 8‐13). Such variety engenders interest and debate, although possibly at the cost of thematic consistency (discussed later in this review).

Overall one theme of the book could be said to involve an assessment of the environment of auditing in the UK, and the extent to which the auditor is privileged or burdened, influenced by or influential in formulating that context. As to the burden, we are informed that much of this is from the influence of law, a recurring referent point for the material. Moizer’s departure point for his analysis of the regulation over auditor independence is in the moral political philosophical literature with its inevitable association with law, government and sanction (Van Peursem, 1993, citing Gewirth, 1965 and Mill, 1859). Chapters 4, 6, 7, 8, 9, 16, 17 and 18 illuminate how many of our standard audit practices are dominated by regulation through statute, common law or statute‐authorised standards. The role of the market as shaper of the audit role is also important to the text, and Chapter 5 deals explicitly with the issue. Certainly the market problems seen to impinge on independence (or its appearance) has long been a concern with the public and its specific inclusion in the text is useful.

Audit is also portrayed as influential, acting as a regulator for the economy or society taken as a whole:

In little over a hundred years, external audits have become a common way of regulating a variety of organizations (Sikka, 1997, p. 129).

The influence of audit standards ‐ controlled, it is argued by many, by the profession for the profession (Chandler, p. 168) ‐ is a powerful means of asserting audit control over business:

In terms of the exercise of reasonable care and skill there has perhaps been an even clearer emphasis on the role of standards acceptable within the profession as the yardstick by which what constitutes a proper performance of an auditor’s duties is assessed (Gwilliam, 1997, p. 122).

The idea of the major firms as market makers is also explored in depth in Chapter 5, a useful analysis of the influence of the profession in economic terms. These are important points, and audit as both subject and creator of its role emerges powerfully from the text.

Another theme is the emergence of audit as a social practice and professional discipline which is itself difficult to evaluate. A point raised by several authors, this difficulty may be due to an absence of research tools available to competently measure audit’s “success” or “failure”, and of the practice of applying compromising surrogates. Some of these surrogates go towards measuring the big failures during economically‐stressed times via litigation. Another example is the application of critical theory to evaluate the likelihood of self‐serving professional activity (e.g. Chapter 7). In other cases, measures of “efficiency” may be inappropriately substituted for an interest in effectiveness (as outlined in Chapter 14 on the questionable value of automation). The problem highlights a major difficulty in evaluating audit practice itself.

While I would have liked to have seen the editors highlight and expand upon these themes for the benefit of the reader, they do emerge and are of interest. In my view, however, the absence of a significant editorial overview to point them out is a weakness of the book. In my own experience of textbook authorship, I have found students to be appreciative of a chapter which introduces key themes, and which acknowledges the editors’ perspective. Doing so may guide the organisation of the chapters, and could contribute to a conceptual understanding of the extensive amount of material usually present in audit.

The question of thematic coherence also brings me to ask the question, “To whom is the book targeted?”. While reference is made to “feedback from students” in the Preface to the book[1], it is not clear from a reading as to whether it would be appropriate to the student new to auditing. Someone unfamiliar with auditing may be confused by issues which are raised but not accompanied by description or example. For example, the appearance of substantive testing issues in Chapter 11 (p. 210), non‐audit services in Chapter 3 (p. 64) and the Foreign Corrupt Practices Act 1977 (p. 43) would call for some expansion. Also, where auditors use terms that have particular connotative meaning in accounting or auditing practice ‐ such as materiality (e.g. p. 172) or even fraud (usually referring here to management fraud) ‐ further explanation or a glossary may be helpful. Finally, and perhaps most significantly, there are few practical examples or illustrations to accommodate different learning styles (Kolb, 1982) or to convey the practical significance of the auditing issues raised throughout the text. An issue‐oriented approach may be a useful adjunct to textbook treatment (Birkett, 1987, p. 46), but is this what the editors intend? This is a pedagogical issue, and my views may not correspond with the editors’ vision for the book’s use, but the potential subscriber to the book may be helped by knowing more about that vision.

Other points are of a minor nature and may contribute to thoughts for a future edition. The placement of some chapters, as mentioned earlier, could be reconsidered. Placing Chapter 9 before Chapter 7 may be useful in establishing the setting for Sikka’s critical analysis. I question whether Part III Special Contexts is a cohesive rubric, or whether the chapters might make more sense if brought in under regulatory or evidential themes. It might be useful to note, under the section entitled “Additional ways of improving independence” (p. 66), that some of these suggestions (e.g. peer review) have been tried elsewhere to various effect. I was surprised that the role of insurance costs was not discussed more in the context of the pricing of audit services, barriers to entry (particularly for small audit firms) and audit firm sizes (pp. 91‐95). There is some contradiction between the way case law history is described on pages 105‐106 (recognising influential cases in the early part of the century) and those described on page 166. The size and nature of discussion questions vary widely and the book could benefit from greater consistency. The section entitled “The Audit Environment” (p. 203) is a bit repetitive to material raised in Chapter 5. The author may wish to think about whether reference to Bayesian theory is appropriate in Chapter 13, Audit Risk and Sampling.

Overall, I found the book interesting reading, and I particularly appreciated the authors’ capture of recent changes to the audit market, regulation, process and automation. I would recommend the book for advanced or adjunct readings, for practitioners and for non‐practitioners involved in the study of audit.

Edited by Jim Haslam with the support of Soon Nam Kim and Paul Nickles, University of Waikato, Te Whare Wánanga o Waikato