Evaluation and Response to Risk in International Accounting and Audit Systems: Framework and German Experiences

Jens Wüstemann ()
Additional contact information
Jens Wüstemann: Lehrstuhl für ABWL und Wirtschaftsprüfung/Sonderforschungsbereich 504, Postal: L 13, 15, D-68131 Mannheim

No 04-20, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: This paper presents arguments with respect to the evaluation and response to risk, placing an emphasis on German corporate governance. It starts by discussing opportunities and limitations of the audit risk approach in detecting accounting and economic risks. Hereafter individual responses to material risks are analyzed by considering potential shortcomings arising from systematic deviations from rational behavior. In the main part, it will be argued that German corporate governance stresses internal reporting duties, some of which could serve as models for future international standards on auditing. By internalizing the information flows regarding substantial risks, negative effects of publicizing this kind of information can be reduced (e.g. self-fulfilling prophecies and litigation risks). This also facilitates a more open communication with monitoring parties. But to ensure the effectiveness of such an internal control, it is essential that the reporting duties of the auditor and the management towards the board members are legalized and put into compulsory form. In an appendix, legislative responses to audit failures in Germany since 1870 until today are summarized. Legal requirements and their development regarding the statutory audit in general, auditor independence, the auditor�s report and the audit opinion are presented.

Pages: 26 pages
Date: 2004-05-25
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged. I thank Christopher Koch, Matthias Maucher and Christina Reifschneider for valuable research support.
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sfb504.uni-mannheim.de/publications/dp04-20.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.sfb504.uni-mannheim.de:80 (nodename nor servname provided, or not known)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:xrs:sfbmaa:04-20

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim Contact information at EDIRC., Sonderforschungsbereich 504, University of Mannheim
Bibliographic data for series maintained by Carsten Schmidt ( this e-mail address is bad, please contact ).