Economic Demand for Auditing

The Economic Demand for Auditing

The need for auditing has always been present in the business world to assure efficiency and accuracy. However, in light of the recent scandals such as Enron and WorldCom, the Sarbanes-Oxley Act of 2002 was born. This Act regulates financial practice and corporate governance. The goals of the SOX Act are to improve accounting oversight, strengthen auditor independence, require more transparency in corporate financial matters, eliminate analyst conflicts of interest and require greater accountability from corporate officials. The Securities Exchange Committee now mandates that every organization, large and small, must adhere to the Sarbanes-Oxley Act of 2002, therefore creating an increased need for internal auditors.

The recent scandals enhanced the awareness of the information risks within companies and how they are caused. Some causes include, but are not limited to, remoteness of information, biases and motives of the provider, volume of data, and complex exchange transactions. Ways to reduce information risk are for the user to verify information, share information risk with management and provide audited financial statements. Internal and external auditors are needed to limit these risks by ensuring appropriate accounting standards are being followed.

The implementation of Sarbanes-Oxley has required public companies to formalize their internal control practices and created a whole new market for accounting firms. Accounting firms also now have an increased responsibility with regard to both public and private audits as a result of the changing accounting standards. An increased expectation from boards of directors has further increased the workload for accounting executives.

Another increased need for auditors is the highly likely convergence of International Financial Reporting Standards and U.S. GAAP in the next couple of years. This is also cause for a need of multi-lingual auditors. More companies are now doing business internationally which broadens the opportunity for auditors and makes it a recession free profession. An emergence of new technologies also opens a need for qualified, competent auditors knowledgeable in that field.

As long as there is always new technology and ways to fraud companies, auditors will always be a need in the economy. The best ways to stay marketable in this profession are to keep up with the changing technology, get a good grip on the Sarbanes-Oxley Act of 2002, become familiar with different industries, and get a certification.