The audit in a modern economy

This chapter presents the contemporary context for auditing and contemplates the future of audit and other assurance services. Audits promote investors’ trust and lower a firm’s cost of capital. Collectively, auditing protects investors’ general trust in capital markets. The complex nature of the contemporary business environment requires auditors to develop a thorough understanding of clients’ business, resulting in auditors being increasingly embedded within the audit client throughout the fiscal year. While the auditor must be independent, audit quality depends upon significant cooperation between the auditor and parties within the client, i.e., management, the audit committee, and other stakeholders. Additional complexity in the contemporary business environment comes from extended financial and nonfinancial information demanded by investors. With their knowledge of verification, auditors are well-positioned to provide assurance on these forms of information, but differences between the non-financial information and standard financial statements challenges the traditional model of an audit.