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Please reply to the below discussion in 2 paragraphs. In the first, clearly state with which parts of the other student’s thread you agree or disagree. You must provide an explanation for why you agre
Please reply to the below discussion in 2 paragraphs. In the first, clearly state with which parts of the other student’s thread you agree or disagree. You must provide an explanation for why you agree or disagree with the other student's thread. In the second, add some additional comments of your own that add to the discussion. the reply must be at least 200 words.
Indispensable Role of the Auditor in a Free Market EconomyCOLLAPSE
A free market economy, also called a laissez-faire economy, is an economy operated with little to no government regulation. Sellers and consumers are able to buy and sell freely, based on a mutual agreement on price, without the interference of government taxes and subsidies (Jahan & Mahmud, 2015). To obtain a free market economy, one must first have the trust and participation of investors. In order for investors to fund the corporations that run a free market economy, they must have confidence in the accuracy and transparency of the financial statements presented to them. This is where auditors come into play.
Auditors play an indispensable role in a free market economy because they are responsible for providing assurance to users (investors) that utilize financial statements, to ensure that the statements published by businesses accurately reflect the company’s financial position. John 17:17 states - “Sanctify them in the truth; your word is truth.” Without trust in the information provided by auditors, lenders will be less likely to invest in the corporations that run the economy, thus preventing a free market economy from happening. According to Steven B. Harris, board member of PCAOB, without accurate and reliable corporate disclosures and financial statements — and competent auditors to audit them — a competitive free market system could not function properly.
Over the years, there have been numerous occasions where financial statements were falsified or fraudulent, i.e.: Enron, WorldCom, and Tyco. Because of this, investors lost trust in auditors, and the statements they produced (trust was regained with the passing of SOX and PCAOB). As an auditor, it is your responsibility to protect against fraud by ensuring that the financial statements bestowed to the public are 100% transparent. In order for a free market to run proficiently, investors must be able to understand the financial state of a corporation, so that their investments are informed, rather than throwing away money in a failed company, which will ultimately damage the economy. Therefore, it is dependent upon the auditor to ensure that financial statements are transparent because this will assure that investors are making an accurate and informed decision.
Ultimately, investors and the general public rely on external auditors to present unbiased and independent audit reports. Therefore, it is fundamental that auditors provide honest and accurate information so that a free market economy can run as intended. Auditors take a lot of risks when they choose to represent the public interest in reliable information. The moral choices they make can easily make or break a free market. Thus, auditors must continue to work hard to warrant the trust that is instilled in them.
Jahan, S., & Mahmud, A. S. (2015, June). What Is Capitalism? FINANCE & DEVELOPMENT, 52(2). Retrieved from:https://www.imf.org/external/pubs/ft/fandd/2015/06/pdf/basics.pdf
Doty, J. (2013, April). The Roles of the Audit in the Global Economy. Retrieved https://pcaobus.org/news-events/speeches/speech-detail/the-role-of-the-audit-in-the-global-economy_455