Share
Explore BrainMass

requirement of independent auditors in the 19th century

During much of the 19th century in Great Britain, independent auditors were not only allowed to have an equity interest in their clients but were required to invest in their clients in certains circumstances. Explain the rationale likely underlying that rule. Would such a rule "make sense" in today's business environment in the United States? Defend your answer.

Solution Preview

Introduction

Auditing is the compulsory process that is recognized by the law of particular country. In some cases, the auditing itself shows that there are some utilities in it. The major utility of the audit is that it makes the financial statements reliable for the public for general purpose. To get this benefit, many organizations conduct independent auditing for their organizations. The audit also insures the safety of the financial interest of the persons who are not associated with the management of the entity. The audit statements of account are also helpful in setting liability for taxes, negotiating loans and for determining the purchases consideration of the business (Kimball & Caserta, 2004).

Rationality of the Rule

In the 19th century, the independent auditors were allowed to have an equity interest in their clients in Great Britain, but they also have to require investing in the clients business in certain ...

Solution Summary

The response addresses the queries posted in 614 Words, APA References

$2.19