Encyclopedia of Law and Economics

2019 Edition
| Editors: Alain Marciano, Giovanni Battista Ramello

Auditing

  • Ari HyytinenEmail author
  • Juha-Pekka Kallunki
Reference work entry
DOI: https://doi.org/10.1007/978-1-4614-7753-2_93

Definition

In its commonly cited definition, the American Accounting Association defines (financial) auditing as “A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users.”

More broadly, auditing is a mechanism for quality assurance: An auditor is a third-party agent that acts as a certification intermediary and that examines, corrects, and verifies the financial accounts of a business in order to make them more credible to various stakeholders, such as investors.

Audit Regulation and Profession

Auditing is regulated by laws, by global and local guidelines published by professional bodies, and also by professional ethics and practice. Audit legislation varies across countries, but typically, auditing of firms listed in stock markets (public firms) is strictly regulated, whereas...

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References

  1. Amir E, Kallunki JP, Nilsson H (2014) The association between individual audit Partners’ risk preferences and the composition of their client portfolios. Rev Account Stud 19:1CrossRefGoogle Scholar
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  5. Hope O-K, Langli JC (2010) Auditor independence in a private firm and low litigation risk setting. Account Rev 85(2):573–605CrossRefGoogle Scholar
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  7. Simunic DA (1980) The pricing of audit services: theory and evidence. J Account Res 18:161–190CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Jyväskylä School of Business and EconomicsUniversity of JyväskyläJyväskyläFinland
  2. 2.Oulu Business SchoolUniversity of OuluOuluFinland