Audit regime
Encyclopedia
An audit regime is usually a rigorous set of forensic accounting
methods that is used to detect fraud
. It refers more generally however to any similar regime of verification of conformity to some standard, e.g. Kyoto Protocol
, Cocoa Protocol
, or some mandatory labelling
scheme. Without such a regime, transparency
is simply not attainable.
Most accounting reform
includes strict audit measures to verify that new standards are met.
Financial privacy
is often in direct conflict with the desire for any stricter audit regimes.
Characteristics of an effective audit regime include:
After major accounting scandals in the United States
that became publicly visible in 2001 and 2002, and the controversies about various ways of claiming carbon credit
s under the Kyoto Protocol
, there has been increasing attention paid to audit regimes in the English speaking world. This has often focused on bringing United States
standards up to the level of much stricter United Kingdom
or European Union
standards, which are of more recent origins.
See also: forensics
, fraud
Forensic accounting
Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally...
methods that is used to detect fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
. It refers more generally however to any similar regime of verification of conformity to some standard, e.g. Kyoto Protocol
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
, Cocoa Protocol
Cocoa Protocol
The Harkin-Engel Protocol, commonly referred to as the Cocoa Protocol, is an international agreement aimed at ending child labour in the production of cocoa. It was signed in September 2001...
, or some mandatory labelling
Mandatory labelling
Mandatory labelling or labeling is the requirement of consumer products to state their ingredients or components....
scheme. Without such a regime, transparency
Transparency (humanities)
Transparency, as used in science, engineering, business, the humanities and in a social context more generally, implies openness, communication, and accountability. Transparency is operating in such a way that it is easy for others to see what actions are performed...
is simply not attainable.
Most accounting reform
Accounting reform
Accounting reform is an expansion of accounting rules that goes beyond the realm of financial measures for both individual economic entities and national economies...
includes strict audit measures to verify that new standards are met.
Financial privacy
Financial privacy
Financial Privacy is a blanket term for a multitude of privacy issues:*Financial Institutions ensuring that their customers information remains private to those outside the institution. Issues include the Patriot Act, and other debates of privacy vs...
is often in direct conflict with the desire for any stricter audit regimes.
Characteristics of an effective audit regime include:
- harsh penalties for any misleading or fraudulent disclosures to the auditor that are strictly enforced
- publicly visible reports and definitions, e.g. for capital categoriesCapital (economics)In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
- an incorruptible professionProfessionA profession is a vocation founded upon specialized educational training, the purpose of which is to supply disinterested counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain....
of auditors that adheres to strict ethical codeEthical codeAn ethical code is adopted by an organization in an attempt to assist those in the organization called upon to make a decision understand the difference between 'right' and 'wrong' and to apply this understanding to their decision...
s, and whose careers are permanently and irrevocably destroyed by any serious impropriety - strict standards to declare conflict of interestConflict of interestA conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
, and rules to prevent competitive arrangements that tend to create such conflicts, e.g. not permitting the auditor to also act as a consultantConsultantA consultant is a professional who provides professional or expert advice in a particular area such as management, accountancy, the environment, entertainment, technology, law , human resources, marketing, emergency management, food production, medicine, finance, life management, economics, public...
on meeting the regime's requirements.
After major accounting scandals in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
that became publicly visible in 2001 and 2002, and the controversies about various ways of claiming carbon credit
Carbon credit
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent equivalent to one tonne of carbon dioxide....
s under the Kyoto Protocol
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
, there has been increasing attention paid to audit regimes in the English speaking world. This has often focused on bringing United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
standards up to the level of much stricter United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
or European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
standards, which are of more recent origins.
See also: forensics
Forensics
Forensic science is the application of a broad spectrum of sciences to answer questions of interest to a legal system. This may be in relation to a crime or a civil action...
, fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...