Critical Examination of The Role of Auditors and Stakeholders in the Global Financial Crisis

Abstract

- The aim of this paper is to qualitatively examine the role of auditors during the financial crisis and propose modifications to auditing practices to prevent future crises. While audit quality is extensively studied, it remains a complex concept challenging to quantify. Hence, various proxy measurements have been developed, with discretionary accruals serving as the chosen proxy for this study. This measurement captures slight variations in audit quality, enabling analysis of a relatively small sample size. Ultimately, the study concludes that the global financial crisis resulted from excessive risk-taking and irresponsibility. While auditing may have mitigated the crisis to some extent, preventing future occurrences requires more than just auditing, as research indicates that auditing alone was insufficient to avert the crisis.