I. The role of auditors from the historical perspective.

1.Prior to 1840:
In the period before 1840, the role of auditors was restricted to performing detailed verification
of every transaction. That the audit objective in the early period was primarily designed to
verify the honesty of persons charged with fiscal responsibilities.

2. 1840s-1920s;
During the 1840s-1920s, auditors were required to perform complete checking of transactions
and prepare correct accounts and financial statements. Little attention was paid to the internal
controls of the company. The role of auditors during the period 1840s-1920s was mainly on
fraud detection and the proper portrayal of the company’s solvency (or insolvency) in the
balance sheet.

3. 1920s-1960s;
The role of auditors was mainly to provide credibility to the financial statements prepared by
company managers for their shareholders. The major characteristics of the audit approach
during this period:
-Reliance on the internal controls of the company and sampling techniques were used.
-Audit evidence was gathered through both internal and external sources.
-Emphasis on the truth and fairness of financial statements.

4. 1960s-1990s.
Three major developments in auditing techniques in this period:
-Heavy reliance on advanced computing auditing tools to facilitate audit procedures.
-Strong emphasis placed on examining audit evidence derived from a wide variety of sources,
i.e. both internal and external, for the audit client.
-Use of risk-based auditing. Risk-based auditing is an audit approach where an auditor will focus
on areas most likely to contain errors.
Auditors were providing advisory services to audit clients.

II. The present role of auditors

The Sarbanes-Oxley Act (The US): It outlines the rules on auditor independence, for example,
the control of audit quality, and the rotation of audit partners, the prohibition of conflict-of-
interest situations. Furthermore, the act also requires auditors to report to the audit committee
on significant matters.

Ramsay Report (Australia):

-Include a statement in the Corporations Act that auditors are to be independent.
-Require auditors to declare to the Board of Directors that their independence is maintained.
-Prohibit special relationships between the auditor and client.
-Establish an auditor independence supervisory board.
-Establish an audit committee to oversee the issue of non-audit services, audit fees, scope
disagreements and auditor- client relationships.
Practice Review Programme and Public Oversight Board (PCAOB) (Malaysia):
-Refocusing on public interest, redefining the audit relationship, ensuring the integrity of
financial reports, separating of non-audit functions and other advisory services.
-The audit methods revert to basics — i.e. risk attention, fraud awareness, objectivity and
independence, and increased attention on the needs of financial statement users.

III. The role of auditors in the future

Expected the role of auditors in the future to include the following duties:
-To express an audit opinion on clients’ financial statements that is published on the Internet.
-To report on the ef fectiveness of the audit client’s procedures for identifying and managing
risks and its system of internal controls.
-To examine, and express an opinion about, the truth and fairness of all the information
(financial and non-finan- cial) provided by company managements in their annual reports.
-To perform management efficiency and effectiveness (or value for money) audits.

IV. Possible Solutions:

Redefine the role of the auditors to be closer to the expectations of the public. The
unreasonable expectations of auditors should be ignored. The auditing regulatory bodies
should consider revamping the “deficient standards” and impose a statutory requirement for
auditors to perform such duties. There is a need for future research to measure the possibility
of the “sub-standard performance” of auditors.