AN EXAMINATION OF THE AUDIT FUNCTION IN SOCIETY

The purpose of this research is to examine the function auditing serves in society. By examining the specific functions of auditing it is possible to understand better the needs and expectations of the user groups involved in using audit reports.; This research uses a multiple constituency approach. The constituent groups are identified as auditors, regulators, labor negotiators, creditors, investors, and management. A survey was developed using twenty-nine functions of auditing as they were identified from the literature. The participants were asked to respond to each question in terms of its importance and also its effectiveness as it is presently performed. A multiple discriminant analysis was done to check the appropriateness of the group selected. The responses were used to classify participants into groups with 98.6 percent accuracy. Between groups comparisons were done using Mann-Whitney U to determine particular group disagreement on specific questions. Within groups correlations using Spearman's Correlation were done to determine which groups perceived a function to be important but not effectively performed. Grand means were calculated to determine which functions were found to be important overall and which were effective.; Auditors were found to have the greatest number of disagreements with all groups. Labor union negotiators also had a large number of differences. The creditors, investors and managers had the fewest. Regulators had significant differences with auditors on which functions were important and effective. Significant differences were also found between perceived importance and effectiveness on seven variables. These are: management stewardship, internal control, lack of bias of reports, efficiency of operation, detection of fraud, deterrence of illegal acts, and mitigation of investment risk.; In conclusion, these functions were classified using the financial accounting concepts framework issued by FASB and adding the category, societal concerns. The functions were then examined with reference to the auditing standards issued in 1989. Factors of continuing concern were noted. Auditing is concluded to serve functions in society that are perceived to be important. The specific disagreement between constituent groups on both the importance and effective performance of these functions was identified.