In the absence of regulation,for auditing to be an effective strategy for reducing the costs of attracting funds,the auditor must:
A)be perceived to be truly independent and the accounting methods employed must be sufficiently well-defined.
B)have been auditing the company for at least the last five years.
C)be formally registered.
D)belong to one of the major ('Big 4') global accounting firms.

Question

Quizplus · Accepted Answer

Independence and well-defined accounting methods are crucial for the credibility of the audit process. Without effective regulation, investors rely on the auditor's reputation for independence and expertise to assess the reliability of financial statements. The other options, such as length of auditing relationship or formal registration, may have some importance but are not as critical as auditor independence and well-defined accounting methods. The auditor does not have to belong to a particular accounting firm to be effective in reducing the cost of attracting funds through auditing.

In the Absence of Regulation,for Auditing to Be an Effective