Auditor obligations in an evolving legal landscape

Tarr, Julie-Anne & Mack, Janet (2013) Auditor obligations in an evolving legal landscape. Accounting, Auditing and Accountability Journal, 26(6), pp. 1009-1026.

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Purpose – The purpose of this paper is to look at auditor obligations to their clients and potentially to third parties such as investors, with a focus on the quality of financial disclosure in an evolving legal framework.

Design/methodology/approach – The article outlines and compares established and emerging trends relative to information disclosure and contractual performance in parallel contexts where information asymmetry exists. In particular, this article considers the disclosure regime that has evolved in the insurance industry to address the substantial imbalance in the level of knowledge possessed by the insured in comparison to the prospective insurer. Abductive reasoning is used to identify causal constructs that explain the data pattern from which the theorised potential for judicial revision of the interpretation of “true and fair” in line with “good faith” in legal regulation is derived.

Findings – The authors conclude that there is little doubt that a duty of good faith in relation to auditor-company contractual dealings and potentially a broader good faith duty to third parties such as investors in companies may be on the horizon.

Originality/value – In the context of stated objectives by organisations such as the International Federation of Accountants to reconcile ethical and technical skills in the wake of the global financial crisis, there is an increased need to rebuild public and investor confidence in the underpinning integrity of financial reporting. This paper offers a perspective on one way to achieve this by recognising the similarities in the information asymmetry relationships in the insurance industry and how the notion of “good faith” in that relationship could be useful in the audit situation.

Impact and interest:

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ID Code: 61718
Item Type: Journal Article
Refereed: Yes
Keywords: Auditing, Insurance companies, Financial reporting, Good faith, True and fair
DOI: 10.1108/AAAJ-03-2013-1262
ISSN: 0951-3574
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Deposited On: 08 Aug 2013 04:00
Last Modified: 08 May 2014 22:55

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