Towards a conceptual framework for auditing

Abstract

Towards a conceptual framework for auditing' suggests a conceptual framework, which it is hoped may help in the teaching and understanding of external attest auditing. Briloff's (1986) view that 'as concern for ecology and the wellbeing of consumers in posterity intensifies, this responsibility (accountability) will extend to the total society and environment' is taken as the philosophical departure point for the conceptual framework.The paucity of attempts to develop a unifying theory of auditing is noted, and a brief history of developments is traced commencing with Mautz and Sharaf in 1961. Flint's 1988 work (The Philosophy and Principles of Auditing) is adopted and developed. Each of Flint's concepts is examined in some detail to consider its significance in the conceptual framework and its implications for audit practice. Reasons for changes from earlier frameworks are offered.In order to illustrate the effectiveness of the framework as an holistic tool of analysis, the concepts identified are then related to the Auditing Standards and Guidelines of our national professional accounting association, the New Zealand Society of Accountants (NZSA). Whilst considerable correlation is noted, some inconsistencies are also identified. It is suggested that the standards and guidelines may not have derived from any philosophical analysis and that the inconsistencies between the concepts and the standards appear to have resulted from a lack of a clear theory as to what constitutes a standard and what constitutes a guideline; higher and lower order ideas would appear to fall somewhat indiscriminately in both. It is noted that this analysis may be repeated in respect of the auditing standards of any professional organization.It is concluded that the application of these concepts can lead to more informed discussion of some of the controversial issues that face the auditing profession at this time, and to an holistic understanding of the discipline of auditing as well as of professional audit promulgations. It is recommended that standard setters should give thought to the adoption of a more holistic approach to standard setting, grounded in a conceptual framework, and that auditing educators should adopt such a framework in order to assist students towards an understanding of the role and process of auditing and away from the memorizing of techniques. 1

Auditing Risk, Materiality & Judgement Standards: An International Comparison

“…This leaves audit risk and audit materiality firmly identified within auditing standards, consistent with the long extant theory of auditing as explained by Pratt and Van Peursem (1993). At the moment risk and materiality are treated as guidelines only in New Zealand standard.…”

“…The impact of risk upon the audit process is sufficiently significant to include 'audit risk' among our concepts. See Pratt and Van Peursem (1993) for a fuller justification. Mautz and Sharaf (1961) themselves claim that the "auditor must rely on his own judgements... mere are no scientific truths which provide answers to such questions" (p.194).…”

“…Flint (1988) and Pratt and Van Peursem (1993), as well as just about every other author on auditing, regard materiality as a fundamental auditing concept. Pratt and Van Peursem added risk and judgement to the list of fundamental auditing concepts for reasons explained below.…”

“…In A Conceptual Framework for Auditing (Pratt and Van Peursem, 1993) it was demonstrated that audit risk, materiality and judgement are fundamental auditing concepts which should form a part of any conceptual framework. However, the New Zealand Society of Accountants [NZSA] treats these issues as guidelines only; they are not treated as fundamental issues.…”

“…The Pratt & Van Peursem (1993) Conceptual Framework is used as a tool of analysis and comparison. This conceptual framework for auditing was based upon prior work by Mautz and Sharaf (1961) and Flint (1988).…”