legal, social, and economic systems that exist in the world. The countries represented
are Argentina, Canada, Mexico, and the United States in North and South America;
France, Germany, the Netherlands, Italy, Sweden, and the United Kingdom in Eu-
rope; Australia, Hong Kong, Japan, Korea, the Philippines, and Singapore, in Asia
and the Pacific area; and Kenya and Saudi Arabia in Africa and the Middle East. Due
to the rapid changes taking place there, no country from Eastern Europe is included
in the survey. After a short discussion of the importance of auditing standards and
their international harmonization, this chapter examines the auditing standards of the
identified countries in regard to the auditor, the attest function, ethical standards and
enforcement, independence, audit reports, and auditing procedures. The chapter con-
cludes with a summary of the results.
15.2 IMPORTANCE OF AUDITING STANDARDS AND THEIR HARMONIZATION.
The Securities and Exchange Commission (SEC) in its discussion document on “In-
ternational Accounting Standards” emphasizes that
While the accounting standards used must be high quality, they also must be supported
by an infrastructure that ensures that the standards are rigorously interpreted and ap-
plied, and that issues and problematic practices are identified and resolved in a timely
fashion.^1The SEC goes on to say that the elements of this infrastructure must include:
- Effective, independent, and high-quality accounting and auditing standard set-
ters - High-quality auditing standards
- Audit firms with effective quality controls worldwide
- Profession-wide quality assurance
- Active regulatory oversight^2
It is evident from this position that not only must accounting and auditing move
in tandem but also the development of high-quality auditing standards and the appli-
cation of those standards under conditions of quality assurance must be of equally
high priority. Accounting identifies, measures, and generates value-relevant financial
information for the capital markets; auditing validates and adds credibility to such
externally reported information. Independent auditors should create the credibility
that is the foundation of capital markets. Effective auditing standards and practices
worldwide are necessary for global investors to discriminate among desirable and
suspect accounting practices and judge the overall quality of financial reporting.
Consequently, the development of both international accountingandauditingstan-
dards should be suitably aligned and keep pace with each other for optimal harmo-
nization results.^3
The International Forum on Accountancy Development (IFAD) was established in
1999 based on the premise that the expertise and resources of the accounting profes-
sion (represented by the International Federation of Accountants [IFAC] and the
15 • 2 TAXONOMY OF AUDITING STANDARDS(^1) SEC, 2000.
(^2) SEC, 2000.
(^3) Needles et. al., 2002.