Question

In Anglo-Saxon countries, mechanisms are put in place to regulate auditors within the framework of professional self-regulation, whereas in many Continental European countries, quasi-governmental agencies play a major role in this area. Required: Briefly describe the main differences between the audit regulation mechanisms in the United States and Germany. Compare the audit regulation mechanisms in the United States and the United Kingdom. Do not forget to include proper APA formatting and citation where necessary.

Answer 1

International differences in Auditing

In Germany, business capital is funded by small number of large banks and pension funds, hence, less demand for independent audits and for a sophisticated, investor-oriented financial reporting system. German accounting profession has less influence in establishing accounting standards--which are set primarily by commercial laws. Lenders and fund providers or institutional owners are deeply involved with the company and have almost all the information regarding the company and thus, the need for detailed financial reporting and standards on auditing is less. This the basic objective there was to check the compliance with the laws and regulations. Whereas in the US, more emphasis is laid on the development of Auditing and Accounting standards.

In the US, many owners provide much of the financing for public companies, and capital markets are large and sophisticated. As a result, shareholders' needs significantly influence financial statements and independent audits, and private-sector bodies have a potential impact on the accounting and auditing standards. In the UK, there is an investor-oriented public regulation where Audit and Accounting profession is well established and operate on a huge scale. Thus , the practices in the UK regarding the Audit is the same as that of the US but in addition there to, the companies law is more emphasised upon. It is checked whether the financial statements present a true and fair view of the state of affairs of the company, it is also checked whether the company complies with the provisions of the companies law. Compliance with GAAP is also important.