Abstract

http://ssrn.com/abstract=959332
 


 



Why Emerging Economies Should Not Follow US and UK Audit Practices


Shann Turnbull


International Institute for Self-Governance; Sustainable Money Working Group

October 16, 2006

Accepted for Presentation to the 14th Annual Global Finance Conference, Melbourne, Australia, April 1-4, 2007

Abstract:     
This paper provides evidence why Emerging Economies should not follow US and UK audit practices that have introduced untenable conflicts of interests and muddled corporate governance practices. The US 1933 law that required corporations to appoint an auditor was based on the prospectus provisions in the UK 1929 Companies Act to protect investors from being misinformed about the future value of a company. However, this is not the legal purpose of a UK statutory audit whose role is to make directors accountable in protecting the company and provide shareholders/members with intelligence for voting on the election and remuneration of directors whether or not the company issues shares or whether it has shares publicly traded. The UK statutory auditor only reports to the shareholders who approve her/his appointment. The US auditor is appointed by the directors and reports to both the directors and shareholders to subrogate the reason for having an auditor to identify any conflicting views between them. The establishment of an Audit Committee with independent directors cannot remove the conflicts. Their introduction from the Sarbanes-Oxley Act and the UK Combined Code introduces additional conflicts between executive and non-executive directors. Some European countries avoid both conflicts by the auditor being controlled by a shareholder committee. Arguments are presented to conclude that convergence of audit practices on those found in the US or UK is not in the best interest of directors or auditors in reducing their conflicts or safeguarding: investors, the proprietary rights of shareholders or self-governance.

Number of Pages in PDF File: 10

Keywords: Audit, Audit Committees, Conflicts, Corporate Governance, Shareholder Committees

JEL Classification: G34, G38, K22, K23, L22, M42

working papers series





Download This Paper

Date posted: January 26, 2007  

Suggested Citation

Turnbull, Shann, Why Emerging Economies Should Not Follow US and UK Audit Practices (October 16, 2006). Available at SSRN: http://ssrn.com/abstract=959332 or http://dx.doi.org/10.2139/ssrn.959332

Contact Information

Shann Turnbull (Contact Author)
International Institute for Self-Governance ( email )
PO Box 266 Woollahra
Cell: +61418222378
Sydney, New South Wales 1350
Australia
+61293278487 (Phone)
+61280655905 (Fax)
HOME PAGE: http://independent.academia.edu/ShannTurnbull/CurriculumVitae
SKYPE: shann.turnbull
Sustainable Money Working Group ( email )
Holyoake House
Hanover Street
Manchester, M60 0AS
United Kingdom
Feedback to SSRN


Paper statistics
Abstract Views: 919
Downloads: 246
Download Rank: 73,762

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.313 seconds