Auditing standards and audit quality A report by the Institute of Chartered Accountants in England and Wales (ICAEW) made the following statement in relation to the question: ‘How do rules affect judgement, integrity and consistency in the conduct of the audit?’

Behind the view that auditors need more rules on how to do their jobs lies a lack of trust in the use of judgement by auditors and a lack of experience and confidence on the part of some regulators. It will take time to change this but rules do not necessarily reduce, and certainly do not eliminate, the need for judgement and integrity. Nor do rules necessarily promote consistency. In standards that are more rules-based, the role of judgement and the need for integrity are simply transferred, in part, to the application of those rules. Current auditing standards do not require more procedures and less judgement than before, but more procedures and more judgement.

Required

a. Are Australian auditing standards ‘principles-based’ or ‘rules-based’?

b. Which of these two approaches will improve audit quality?