Question

describe the government effort to reduce audit failures

Answer 1

Effective governance by government can provide reasonable assurance of the quality of financial information and reduce audit failures, hence influencing auditor resources and effort. The revised auditing standards started the U.S. Sarbanes–Oxley Act that requires the implementation of risk-based auditing; necessitating those auditors must be familiar with corporate governance mechanisms.

On July 30, 2002 President Bush signed a law- Sarbanes-Oxley Act of 2002 and the purpose of the act was to protect the shareholders, investors and the general public from accounting errors and fraudulent practices in the enterprise. The act is vital to the profession of accounting as it formulated and created a newer Public Company Accounting Oversight Board, also known as PCAOB and has provided the authority for setting the standards for the auditors of the firms, which are publically traded and brings an end to the century of the regulation of auditing professionally. Prior to formulation of Sarbanes-Oxley Act, accounting professionals were free and under no obligation but after the formation of Act, they are under obligation and are continuously monitored. The provisions of the Sarbanes-Oxley Act have limited a public company’s choice of auditors by placing a strong emphasis on the maintenance of independence between the auditor and clients.