The of import of corporate administration is emerging quickly and published in worldwide such as USA, UK, Japan and many other states harmonizing the account made by Joshi and Wakil ( 2004 ) in their diary. The corporate administration literature presumes that the Board of Director playing an of import function in the administration map since the construct of company as a separate legal entity came into being. Shareholder will name Board of Director to pull off operation of company and accomplishing sufficient return for stockholders ( Ballesta and Garcia-Meca, 2005 ) nevertheless those agents ( Board of Director ) might non ever move in the involvements of the company ‘s proprietors ( stockholders ) under the struggle of bureau theory.
The Board of Director might show fiscal statements that contain job such as misstatement, fraud, prejudice and etc. If those stockholders no found out those jobs, they will non cognize that the company is traveling concern and go on swear the public presentation of Board of Director. To derive assurance believe that those fiscal statement prepared by Board of Director are accurate and comply with the needed criterions and ordinance, stockholders needfully appointed independent external hearer ( besides known as statutory hearer which is necessitating by Companies Act 1965 in Malaysia ) to analyze those fiscal statement which prepared by Board of Director and show their sentiment on whether the fiscal statement are prepared and presented in all material respects in conformity with an identified fiscal coverage model in a true and just position and issues standard audit study.
This survey foremost is discussed what is the standard audit study, following up is the intent of standard audit study is prepared and at the terminal is the utility of standard audit study to stakeholders.
Standard Audit Report ( SAR )
The standard audit study address the range of hearer ‘s legal duties is prevent and detect those fraud by verifying all minutess, exercising considerable judgement in the choice of audit processs, dependability of internal control of the entity and the responsibility of direction is prepared the fiscal statements and care those accounting records. ( Dixon, Woodhead and Sohliman, 2006 ; Fadzly and Ahmad, 2004 )
Section 174 of the Companies Act 1965 requires the hearers should province in his sentiment whether the fiscal statement give a true and just position, and are in conformity with Act and applicable approved accounting criterions ; and the accounting and other records and the registries required by the Act have been decently kept by the company in conformity with the Act. Section 169 of the Companies Act 1965 province that the manager of company need present audited fiscal statement at one-year general meeting ( AGM ) and do certain those statement give a true and just position of the company ‘s personal businesss and consequences of its operation.
Harmonizing to the Al-Thuneibat, Khamees and Al-Fayoumi ( 2008 ) in their diary, standard audit study represents the chiefly of import portion of the audit procedure and it is the chief channel of communicating between the hearer and the user of the fiscal statements. Those hearer will turn to those fiscal statements are prepared under International Financial Reporting Standards ( IFRS ) which grown in footings of the measure of disclosure and the item therein and presented truth and reasonably in conformity with Generally Accepted Accounting Principles ( GAAP ) and are based upon the audit within a deemed materiality degree. Standard audit study is the reappraisal and rating study resulted from the trial of control and substantial processs that auditor performed therefore the study must reasonable, nonsubjective and acknowledged by the users as a important beginning of information.
Harmonizing to Giacomino and Akers ( 2012 ) , there have been few alterations and betterment in the standard audit study since several old ages and the considerable alterations in the audit study are: added “ independent ” to the rubric to place this as an audit study and distinguish it from other study on fiscal statement that might be issued by Board of Director, addressee to the members of the company.
Introductory paragraph, changed “ examined ” to “ audited ” to identifies which fiscal statement are enclosed by the hearer ‘s study and when the audit was accomplish, added the diction that “ these fiscal statements are the duty of direction ” to clarify that the fiscal statement are the responsibility of direction and added this specific statement “ our duty is to show an sentiment on these fiscal statements based on our audit ” to sing the hearer ‘s duties is to show sentiment on fiscal statement.
Scope paragraph, scrutinizing criterions require that an audit be “ planned and performed to obtain sensible confidence about whether the fiscal statements are free of material misstatement ” and added two sentences to depict audit processs to explicate the range of the audit so the criterion of the hearer work is clear and other factor such as restriction of audit testing is known, at the terminal of the range paragraph, added “ we believe our audit provides a sensible footing for our sentiment. ”
Opinion paragraph, adding this statement “ in all stuff respects ” to show the hearer ‘s sentiment on the fiscal statement in footings of true and just position and replaced the “ capable to ” give voicing with an unqualified sentiment and explanatory paragraph to vouch the reader that the audit has been carried out in conformity with recognized rules and patterns.
Date of the study to inform the user that the hearer has considered effects of minutess that the hearer became cognizant of on the statements up to that day of the month. Auditor ‘s reference, normally list out where the hearer responsible locate so he can be contacted if necessary. Auditor ‘s signature, the hearer ‘s study should be signed assume duty for the audit.
Those alterations were intended to do the audit study more utile by specifying an audit and more efficaciously pass oning the duties of direction and the hearer with the hope that SASs ( 53-61 ) would assist cut down the outlook spread.
However, hearer ‘s sentiment in standard audit study is self explanatory and based on trials performed based on statistical samples, reappraisals, treatments with direction and most significantly degrees of materiality that is different among entities. Those hearers are reacting to scrutinize failures, this inducement hearer follow up harsh and proper guidelines for supplying high quality standard audit study which focus on the cardinal countries of hazard to set up and continue their reputes. ( Fafatas, 2010 )
The purpose Standard Audit Report
Monitoring agents ‘ activities and bettering transparence
Harmonizing to the bureau theory, independent external hearer considered as a consistent group in supervising the agent ‘s activities and pare down the benefits from keep backing information because the hearers assisting chief maintain an oculus on the agent ‘s activities and bettering transparence of all the concern activities. As a consequence, hearers will issues standard audit study that highlights internal control system and how they monitoring the fiscal coverage procedure in assisting users to understand the internal control system and fiscal coverage procedure. Therefore the standard audit study will increases the trustiness of fiscal statement, supply diverse utile information and help the users of the study rating the public presentation of the company and doing wisely determination. ( Hashim and Rahman, 2011 )
Utility of the Standard Audit Report
Supporting stakeholders doing sagely determination
Stakeholders needed standard audit study to back up their investing and fiscal determination, therefore hearer timely entry the elaborate criterion audit study will gives more assurance to those stakeholders even the auditing has built-in restrictions in footings of range of work and materiality.
Harmonizing the study research of Gomez-Guillamon, 2003, one time the standard audit study publically known, those users of the standard audit study such as stockholders, possible investors, bankers and providers will do shrewdly investing and imparting determination based on their judgement and assurance with their concluding determination, this has show that standard audit study has greatest influence on doing determinations at aggregative degree. Company ‘s stockholders and possible investors evaluate the public presentation of the company, bankers evaluate the recognition worthiness of the company before loaning and providers investors evaluate the liquidness of the company before providing goods based on the type of sentiment ( unqualified, qualified and accent of affair ) in the standard audit study that issued by hearer.
Harmonizing to ISA 700, qualified hearer ‘s sentiments are spliting into four of the different types and viz. : limitation-on-scope, traveling concern, dissension with direction and disclaimer of sentiment. In private and international trading exempt companies, the type of making prevalent was limitation-on-scope and this implied direction did non execute good their responsibility such as did non decently execute the annual stocktake on the clip. The traveling concern making normally were made by exclusive practicians due to they was non advanced with current criterions and this makings were qualified on the footing of uncertainness.
The dissension with direction making was related to disagreement with the intervention or revelations of affairs in the fiscal statements is, this occur when the hearer disagreed with direction as to the non-preparation of amalgamate fiscal statements, inappropriate accounting intervention and going from International Financial Reporting Standards ( IFRS ) , deficiency of professional rating of belongings and sums in the fiscal statements, chiefly in position of the fact that direction did non decently supply for depreciation on belongings and fixed assets. The disclaimers of sentiment making merely fewer issued by hearer, this making occurs when hearers could non execute audit processs on a figure of fiscal statement points and the company with a earnestly impaired traveling concern in add-on to the non-provision for depreciation by managers. ( Farrugia and J. Baldacchino, 2005 )
From those point, we found out that the standard audit study has greatest influence those stakeholders doing sagely investing and fiscal determination at aggregative degree, gives those stakeholders gain more confident to swear the public presentation of the direction and those fiscal statement is from favoritism and prejudice and truth and fairness even scrutinizing has built-in restrictions in footings of range of work and materiality. Hearers reacting to scrutinize failures, therefore hearers set up and continue their reputes for supplying high quality standard audit study which focus on the cardinal countries of hazard
Interestingly, harmonizing to CFA Institute conducted recent study in March of 2011, those users of the standard audit study suggestion that the hearer needed provided more specific information in the standard audit study and sententious reappraisal about how they reach their sentiment. This shows that the standard audit study still has infinite to betterment.