Toward An Auditing Philosophy (PART2)

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Jalanan di Kota Kuching, Sarawak, Malaysia

Unsolved Problem in Auditing . At the present time, auditing is plagued with a number of perplexing problems involving a wide variety of subjects. Fpr example, are the customery test and samples on which the auditor relies sufficient to justify his opinion ? Here, it must be recognized , he is dealing in probabilities. In the past we have considered the judgement of an experienced practitioner adequate ; the new interest in the application of statistical sampling methods to auditing requires that we to judge the adequacy of test and sample. Perhaps we must understand the laws of inference and probability theory as well. A question exist as to wether there is a minimum audit program requited in every case and , if so , what it includes ? How far in the direction of advocacy in tax work and in giving operating and financial advice through management services can an independent auditor go without weakening his independece ?

But not only is the appropriate extent of the auditor’s services a matter of some doubt , the extent of his responsibility in the performance of even his hstorical function is far from settled. Some contend that an independent auditor has a responsibility to disclose to his client and possiblyy to others any weaknesses in internal control which he discovers during his examination; some dispute this.  The auditor’s responsibility for the discovery of irregularities of various kinds has been the subject of several papers published within the last few years. This problem leads to the question of wether management inefficiencies  and faulty judgements should be disclosed , a version of the “policy audit” with overtones of disclosure.

How far auditors are responsible  for disclosing the limitation of traditional types of financial reports during a period oof substantial changes in general price levels in a question that has not yet received an adequate answer. Even the general purpose of an auditor’s verification test is not agreed upon. Should it be to determine How far the system of internal control can be trusted to produce reliable data, or is it to assure the auditor that the amounts reported in the financial statements are reasonable and reliable in themselves ?

This is  an imposing list of problems and unsettled areas , and with little efforts even more could be added. It is not our purpose to suggest that auditing  has more than its share of unsolved problems. Similiar perplexities encumber every field of knowledge, and auditing is neither better off nor worse off than many other professions. Nevertheless, there is cause for concern. First, the  existence of so many fundamental questions implies the absence of accepted principles which might serve as guides for their solution. Second, the attitude of some practitioners toward solving certain of these problems is unfortunate indeed. Too many practicing auditors seem to say ,”It doesn’t matter to me which  way we decide these question, just so we get a firm decision and know where we stand.” Of course it matters how such question are handled. It matters immediately because some suggested solutions add to the burdens, responsibilities, or prestige of the auditor while others detract.  But more important , it matters in the long run. Problems must be solved in such a way that the answers are compatible or at least reconcilable. Inconsistencies have no place in auditing in the long run; they may be unavoidable at the moment, but if we are to have a profession worthy of the name we must work to eliminate them. Thus solutions which cannot be rationalized  with one another lead only to additional problems. 

 

Without sheer luck , the only way in which problems such as these can be satisfactorily and permanetly solved is by appear to certain basic ideas which constitute the philosophy of the particular study . It is our firm belief that the bits of theory now in the literature can be integrated and brought together as part of a comprehensive system. Once this system is outlined and elucidated it will provide a framework within which these and similiar problems can be attacked in a rational and consident manner. Once such a theory is stated , if only in an elementary manner, its usefulnes to practitioners and the profession will become apparent.

This is not to say that we propose to solve all the problems cited here in this brief volume. This is proposed as an introductory work only. Here is undertaken no more than an investigation into the possibility and nature of such a theory. Progress always comes slowly and we will be content if we can do no more than point the direction.