Contemporary issues in accounting and finance Essay

Contemporary issues in accounting and finance - Essay ExampleA recent FEE (Federation of European Accountants) publication states that an individuals objectivity must be beyond question when conducting and reporting on a statutory audit (FEE). This paper will critically valuate this record with particular reference addn to some fundamental financial/accounting/auditing concepts and external studies. objectivity of statutory tenders There are numerous situations where a statutory auditors objectivity would be questioned when auditing financial statements of a firm. To illustrate, an auditor faces this challenge while dealing with the valuation of assets. In order to attend this situation clearly, it is necessary to discuss the difference between unobjectionable foster and historical cost. Under historical cost accounting, assets and liabilities are valued at original acquisition price and any increase or decrease in their market value over the years is not taken into account (Shome 1995, p.135). In contrast, assets and liabilities are valued at the market price in the true date under the fair value accounting method (Wood 2009, p.344). Traditionally, books of accounts were kept at historical costs. However, fair value accounting replaced this ceremonious accounting practice nearly two decades ago and since then the assets and liabilities are measured at their current value estimates (Ramanna 2013). Today, most of the firms value assets and liabilities at the estimates of their current market value in order to give the stakeholders a detailed view of the financial status of the business. Since dubious assets/liabilities valuation practices have led to many corporate failures over the last decade, it is a challengeable task for auditors to certify the reliability of fair value accounting. Under such circumstances, a statutory auditors objectivity is likely to be questioned if he has any specific interest in the firm. Fair value accounting represents the social construction of ingenuousness whereby legitimacy, power, and illusions are created. As experts point out, new epistemic criteria have to be created to address the socially constructed human race of fair value accounting. Fair value accounting clearly represents socially constructed trustworthyity, and auditors are expected to find professional ethics and legitimate practices (Jeppesen & Liempd 2011). In order to verify this socially constructed reality, auditors liberty has to be specifically promoted. The auditors independence can significantly affect the credibility of financial statements (Olagunju 2011). Hence, there is a positive relationship between independence of an auditor and credibility of the financial statement (Ibid). In addition, an auditors independence can justify his objectivity to a great extent. The auditors independence has two distinct aspects including real independence and perceived independence (Sucher & MacLullich n.d.). Accomplishment of both (prenominal) these aspects is essential to achieve the ultimate goals of auditors independence. Real independence can be evidently defined as the independence of the auditor or independence of the mind (Palmrose & Saul 2001). More precisely, real independence is related to the state of mind the auditor maintains and how he manages a particular situation. A unfeignedly independent auditor would make independent decisions even though he is forced to handle a compromising condition by the company