Critical Analysis of the Present and Future Development of Audit Services Within the Banking Industry after the Financial Crisis

The unprecedented downfall of Enron Corporation in 2001, otherwise also known as the ‘Enron scandal’ shook the financial market and subsequently resulted in the ‘unexpected’ closure of one of the ‘Big 5’ accounting firm Arthur Anderson. The collapse of these two giant companies have provided an increased impetus for the improvements in financial reporting and auditing (Graham and Neil, 2004, p.10). This incident has triggered intervention by the US government, which introduced immediate changes, reforms and new regulations over the accounting and auditing industry with the aim of restoring confidence amongst the stakeholders and general members of the public. The 2008 financial crisis has not only been overshadowed by the attempted reforms in the US, and instead, the crisis spread across the globe. One of the key attributes to the crisis stem from the auditing profession where auditors had continuously failed or erred in exercising due diligence in issuing clean opinions on the fraudulent statements to major financial institutions. The repercussions have, once again eroded the public confidence and trust in the auditing industry, the market do not seem have been assured by the unqualified financial report produce by large accounting firms (Sikka, 2009), hence justifying further examination into potential further reforms, or intervention from the government. Therefore, the main aim of this research is to explore the potential approaches in rebuilding confidence on the financial audit services. This research shall also evaluate the feasibility of potential changes which are needed for the future development of the audit profession. The research design primarily leans towards the qualitative means with semi-structured interviews methods. The investigation into the causes of financial crisis and reforms of the auditing profession necessitate the researcher to seek the knowledge in confirming the ‘truth’ and this may be done from the epistemology perspective. In ensuring the credibility and viability of the primary and secondary data, qualitative method has been given preference over quantitative means for the purpose of the research. While interviews in general would assist in obtaining ‘real’ information from the respective interviewees as had been identified, the information would contribute towards not only substantiating the secondary research but also, in answering the research questions which seeks to address the feasibility of the auditing profession for the future, and validity of the auditing reforms. The research findings recognised the importance of having audit service within the financial market. On the contrary, the results from the interviews expressed much divided opinion in terms of further audit reforms proposed by this research. In relation to the feasibility of suggested audit reform and potential government intervention of the auditing industry, majority of the audit professionals interviewed opposed to any further audit reforms and that any or further government intervention would do more harm than good to the financial market