ABSTRACT
This chapter discusses how regulations affect the auditing profession and audit practices. It focuses on the impact of the rules of the professional developments on the formation and composition of the profession. The chapter discusses the impact of governmental regulation on audit practices in the US, based on empirical evidence related to the enactment of the Sarbanes-Oxley Act of 2002 (SOX). It also discusses research on specific audit regulations, such as audit report changes, audit partner name disclosure, and joint audits where two audit firms simultaneously and yet separately audit a company and sign a common audit report. Transparent, informative, and accurate financial reporting is the lifeblood of the capital markets and is essential for investors to make informed decisions as to how to allocate their capital. It is said that self-regulation provides credibility, generates public trust, and reduces unnecessary and costly governmental intervention. The audit committee is responsible for the appointment, compensation, and oversight of auditors.
