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    Tawsif Hasan
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    Different philipsophies regarding audit

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    Different philipsophies regarding audit

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    32 views9 pages

    Auditing in Perspectives

    Uploaded by

    Tawsif Hasan
    Different philipsophies regarding audit

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 9
    AUDITING IN PERSPECTIVE ‘N RECENT YEARS considerable interest in philosophical studies of various I special fields of knowledge has been evident. Individuals working with- in special fields have become curious about the nature of their subject mat- ter, its relationship to other fields of knowledge, especially the basic disci- plines, and the extent of progress it has made in developing a sound theory structure, Writing on “The Order and Integration of Knowledge,” Wil- liam O. Martin states: There is evidence that specialists in various fields of knowledge are becoming incecasingly concerned with the nature of the kind of knowledge with which they identify themselves professionally. The interest is not new, but the urgency of the It the problem were merely verbal, a question of correct naming of kinds of knowl- edge, the matter would be relatively teivial. In fact it is a very serious one having to do with the nature and order of various kinds of knowledge. For if a person who is professionally identified with a subject does not know cleacly its catuze, which includes not only what it is but what it is aot, then how can he know when he is practitioner of his subject and when he is not? How can he know whether « ‘question is relevant to his subject or not? How can he know what evidence is and is not relevant to « problem? What kind of evidence is relevant in the demon stration of the truth of what kind of propositions and what kind of knowledge? If all this is not clear, a person may wander far afield from the subject he knows under the delusion that in some manner or other his special subject “proves” something in a subject about which he may know very little.” ‘We can have an acquaintance with a field of knowledge at any one of sev- eral levels. We may have only a very superficial notion of the feld, a recog- nition that it exists and a hazy idea of its subject matter, or we may. actually work in the ficld and be competent to handle its methodology and subject matter. Finally, we may have a real insight into the kind of knowledge ia the field, the nature, strength, and weaknesses of its methodology, and the problem areas which still pose difficulties. There is as much difference be- tween the second and third types of acquaintance mentioned here as be- tween the first and second. Professor Martin was concerned with the deep insight described in the third type of familiarity; without real insight, one can easily be led far astray. m Oliver Martin, The Order and Integration of Knowledge (Ann Arbor: ‘The University of Michigan Press, 1957), pp. 3-4. 240 a een thine eka tela adaiaebionte AUDITING IN PaRsercttivn au In this study we have been concerned with attaining that type of insight into the subject matter of anditing, We have attempted to unoser itt batie assumptions and to describe ils own peculiar methodology. Using these a1 a basis, we have then attempted to develop ne of its central concepts which in tura led us to proposed solutions to some of the practical problems of professional auditing. It now remains to take a brief over-view of auditing asa field of knowledy sional practice. san intellectual discipline, and as a field of profes: Historical Development. Space docs not permit anything like a compre: hensive review of the historical development of auditing here, and such a work is better left to others in any case, But it is desirable to note even brieBy the development of auditing over the years both to sce important changes and the more constant characteristics. Richard Brown points out the early appearance of auditing in these words: ‘The origia of auditing goes back to times scarcely less remote than that of counting. . . . Whenever the advance of civilization brought about the nec ef one man being entrusted to some extent with the property of another advisibility of some kind of check upon the fidelity of the former would become appareat! Among the earliest audits of which we have written records are manorial audits of the period between the thirteenth and sixteenth centuries in Great Britain, Ia the manorial houschold, the auditor was # person of consicer- able importance. Some of his authority came from the parties by whora he was appointed, the nobleman he served; and additional authority came from statutes. Probably the carliest statute of this kind was one passed by Edward I in 1281 which read: Concerning servaats, bailiffs, Chamberlai s, and all manners of Receivers, which are bound to yield Accompt, . . . when the Masters of such Servants do astiga Auditors to take their accompt, and they be found in arcerages upon the Accompt, all Things allowed wiich ovght to be allowed, their Bodies shall be attested, and by the ‘Testimony of the Auditors of the same Accompt, shall be sent of delivered unto the next Gaol in those Pats. .. About the same time the practice of submitting trusted servants to an au- dit was extended to certain public officials, particularly tax collectors, These early audits were intended to provide an independent review of the accounting records and reports and of the work of those subjected to audit. The method was little more than a careful comparison of reported chard Brown, op. cits p. 74, * Quoted from Brown, of. cit., p. 76, 242 THE PHILOSOPHY OF -AUDITING facts with actual amounts on hand, documents, and any other available evi- dence, The audits were detailed, no reliance being placed on sampling at that early date, The audit was performed either by an individual auditor for the nobleman, or by a committee, in the cate of a public official. Thus the report could be delivered directly and there was little problem of communi- cation, Auditors, of course, had no professional status although they were expected to discharge their dutics honestly, skillfully, and with due regard for their employer's interests. Independence was obtained through appoint- ment by the nobleman and prevention of any private contact between the auditor and the auditee, There was no third party interest at that early date. Later, the practice of auditing was extensled to trustees’ and bankrupts’ accounts, The auditing of a trustee's accounts added the technical problem of distinguishing between capital and income, a problem not evident in the early manorial audit. The audit of the accounts of bankrupts added an ele- ment of extreme skepticism not normally found in the master-servant rela- tionship. In those early days bankrupts were looked upon with disfavor and as probable speculators or criminals rather than as the unfortunate victims of adverse business conditions, In both trustee and bankruptcy audits, courts usually had an interest. This added still another element to the rela- Uonship, as the court was in effect a third party interested not only in the representations made by the reporting party but also in the administration of the affairs of the person subjected to audit. Thus we see auditing expanding in scope and extent of responsibility to mect the needs of changing conditions. Out of these early examinations came creditorship audits and in time the corporate audits with which we are familiar today. Thete seems no need to recount the unfortunate history of some of the early joint stock companies in England, the wave of speculation and even fraud that almost stopped their formation, and the conscquent intervention of Patliament by the passage of the various Companies Acts which, among other things, provided for inde- pendent audits, a pattern of financial staiements, and the tights and duties of the auditors. Auditing in this country developed somewhat differently, but again there is no need to review the various steps which have brought us to the present stage of auditing development. : If we compare present audits with the earlicr examinations of accounts, we find considerable change in the methodology, but telatively little change in purpose or point of view. Substantial progress has been made in the adoption of sampling methods, and even now we seem at the threshold of further progress as statistical sampling principles receive more and more at- AUDITING IN PERSPECTIVE : *y tention, New techniques such as confirmation and examination of documea- tary evidence have become possible because of the development of Business practices generally, and we have had a general recognition of the difigrence between techniques and standards. But the purpose of an audit still seems to be to provide certain interested parties with an attestation of the reliabil- ity of certain information supplied by those entrusted with the property of others. | i . . Asa group, independent auditors have made progress not on! 7 in obtain- ing general recognition as a profession with high standards of ethical con- duct, but also in imposing such standards on most members of the profes- sion. Recently, however, there have been indications that auditirg and audi- tors are not accepting as much responsibility or providing quite the kinds of service desired by some members of our society. At the same time, new opportunities for service in a number of directions have made their appear- ance, and a realistic appraisal of the situation suggests that some of these opportunities entail responsibilities incompatible with others. Auditing has thus changed with the times in the past, and there are indi- cations that it should be prepared to change with the times now and in the future. In changing, however, it is important that auditing leadership cec- ognize the limitations and potential of the profession and ‘the feld of knowledge with which it is concerned. No profession can afford to spread itself over a number of widely divergent and even conflictir g types of ac- tivity without careful consideration of the hazards involved. ~ Auditing as a Field of Knowledge, Both in practice and in its academic environment, auditing has appeared as a branch or subdivision of account- ing. We have neither a profession of auditing nor departments of auditing in universities; instead we have certified public accountants and depart- ments of accountancy. But as others have ‘pointed out, this is the way new fields commonly appear. By a process similar to that of cell division, in which one cell divides into two, an established field of study finds that some phase or portion of its activities becomes suflicicatly welldeveloped to stand alone and sufficiently distinguished from other activities to merit sep- arate identity. This is the case with auditing, Although it first appeared as a division of accounting, it is fast reaching the status of a se>acate discipline. Indeed, its future development depends to a considerable =

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