phrases “present fairly” or “give a true and fair view” are equivalent terms. As can
be seen in Exhibit 15.2, both phrases are widely used.
ISA No. 1 does not address what may be a major difference in the objectives of
audits in determining whether the financial statements are prepared according to re-
quirements prescribed by law or whether they are presented solely in accord with a
set of accounting standards. France, Germany, Sweden, and Italy require both deter-
minations, whereas the United States, the Netherlands, Canada, Mexico, Japan, and
the Philippines require only the latter.
(d) Source of Auditing Standards. Most countries rely on professional bodies of ac-
countants for the establishment of auditing standards. Only in a few countries are au-
diting standards significantly influenced by national laws. An example of the latter
practice is Germany, although the professional body issues standards and guidelines;
examples of the former include Argentina, the United States, Italy, and Australia.
Other countries, such as the United Kingdom and Hong Kong, rely on a combination
of legal and professional standards. Sweden and the Netherlands seem to have less
detailed auditing standards, relying to a great extent on the basic competence, judg-
ment, and knowledge of the auditor. The wide differences in the establishment of au-
diting standards in the countries surveyed would seem to point to the practical diffi-
culties of achieving international harmonization of auditing standards.
15.5 ETHICAL STANDARDS AND ENFORCEMENT. Two areas often mentioned as
possible obstacles to harmonization are the enforcement of ethical standards and the
application of the concept of independence. This section and the next are devoted to
these topics. Exhibit 15.3 summarizes ethical standards, enforcement, legal liability,
and responsibility of the detection of fraud for each country in this survey.
(a) Ethical Standards and Enforcement. In most countries, the establishment of eth-
ical standards is a complex process. In some countries, such as France and Kenya, the
code of ethical conduct is a matter of law, and enforcement involves penalties under
the law. Most countries set and enforce ethical standards through a process that in-
volves both a legal basis in law and a code of ethics adopted by a professional body
of accountants. In Canada and the United States, ethical standards are established in
each province or state both by law and by professional bodies. While there are simi-
larities among these codes, differences do arise, especially during periods when
changes are adopted at differing rates.
The effectiveness of enforcing ethical standards varies from country to country. In
most of the countries studied, an auditor who violates the ethical standards may be
disciplined either by law or by the professional organization, with the penalties rang-
ing from a reprimand to a fine or expulsion. In the United Kingdom, professional
bodies have difficulty obtaining evidence because they lack subpoena power. In the
United States, expulsion from a state society or the AICPA does not necessarily pre-
vent the expelled member from practicing public accounting, because only the state
boards of public accountancy have the authority to revoke a license and the boards
often fail to act. In other countries, such as Japan, France, Germany, the Netherlands,
and Kenya, the government often takes a formal role in the enforcement of standards.
Because the enforcement of national standards is uneven, international enforcement
can be expected to be even more difficult.
International organizations, such as the IFAC, depend on the individual countries
15 • 24 TAXONOMY OF AUDITING STANDARDS