Love how auditing can ensure a good relationship between principle and Research Paper

Love how auditing can ensure a good relationship between principle and agents - Research Paper Example Audits enhance economic prosperity, expands the variety, number and the value of transactions that people are prepared to enter into. In recent years, however, in the light of corporate scandals, auditors are witnessing demands to improve audit quality, globally. The UK is seeing changes to promote greater transparency, but there are demands to further improve the system. The question is to how and to what extent this issue can be addressed (Bohren, Oyvind, 1998).   In order to understand all the outstanding queries, it is inevitable to have an understanding what audit means to all the parties involved in the dealings. We must ask ourselves as to what the sole purpose of an independent audit is and what are the elements that enclose the role of audit? The main reasons in the conflicts between the principles and the agents are, the principles lack trust in their agents because the information and motives are different of both parties, principles, whether rightly or wrongly, they think that the information that is being passed on by their agents is not accurate, and there is no uniformity of motives between the both parties. It is important to understand how this essential tool of audit has been developed over a period encompassing hundreds of years; it is important to understand its purpose and how useful it has become. In the domain of economy, the audits of financial data is publicly available nowadays, many factors and interests come into pla y. In this situation, a simple audit is not likely to be able to answer every question but it surely starts things up. Agency Theory defined the perception of connection for agreements which may reduce the conflicts between resources holders. Principle is the regulatory and the authoritative body to handle one or more agents at a time. The concept of Agency Theory come into being in early 70s, however it has the long diverse history