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CHAPTER 14:COMPARATIVE INTERNATIONAL AUDITING AND CORPORATE GOVERNANCE Chapter Outline I. Auditing is an integral part of multinational corporate governance. A. Auditing is expected to improve the precision, quality and reliability of information made available to the market, and to enhance investor confidence in such information. B. With the current trend toward globalization of markets, and rapid growth in international transactions, securing investor confidence is crucial for MNCs. C. The Organization for Economic Cooperation and Development’s (OECD) revised code of corporate governance emphasizes among other things, that auditors should be accountable to shareholders, and that boards of directors should effectively oversee the financial reporting function. D. Some of the specific measures introduced by the Sarbanes-Oxley Act to improve corporate governance relate directly to auditing, for example, establishment of a new oversight board for the accountancy profession, tightly defining ‘independence’ of audit committee members, requiring external auditors to report directly to audit committee, and prohibition of certain non-audit services by external auditors. II. There are major variations in many aspects of external auditing across countries, including the purpose of external auditing, the audit environment, regulation of auditing, and audit reports. A. The purpose of external auditing can be different between Anglo-American countries and continental European countries. For example, German auditors take a much broader view of the concept of “client” than do their counterparts in the U.K., perhaps due to the particular corporate governance structure in Germany. B. The cultural value orientation of a particular country can have an impact on the audit environment in that country. For example, the perception of auditor independence and audit judgment can be affected by culture. The audit environment of a country is also heavily influenced by its accounting infrastructure, which includes preparers and users of information, information intermediaries, and mechanisms for regulating accounting information. C. Approaches taken to regulate auditing in different countries range from those that
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This note was uploaded on 03/21/2012 for the course BACC 102 taught by Professor A during the Spring '11 term at Andhra University.

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