What is it about?
In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.
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Why is it important?
This encompasses an application of Carroll's pyramid of Corporate Social Responsibility - as well as Lord Atkin's neighbor principle - and the need for a consideration of factors which have become all the more relevant in the digital and audit analytic age.
Perspectives
Arguments relating to flexibility, tailor made adjustments, relevance and applicability constitute vital reasons and factors why subjective approaches and principles need to be incorporated in standards. However accountability mechanisms need to exist to ensure that unduly subjective applications (or a potential to divert significantly from rules and intended objectives) are discouraged.
Prof Marianne Ojo
Northwestern University
Read the Original
This page is a summary of: The Neighbor Principle, Principal Agent and Stakeholder Theories: Proposed Model to Address Challenges of Digital and Audit Analytics (Presentation Slides), SSRN Electronic Journal, January 2018, Elsevier,
DOI: 10.2139/ssrn.3238964.
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Resources
The Neighbor Principle, Principal Agent and Stakeholder Theories: Proposed Model to Address Challenges of Digital and Audit Analytics
What is the "neighbor principle"? Why is it still relevant since its debut in the famous landmark case of Donoghue v Stevenson (1932)? Even though the tort law in respect of a duty of care and what can be considered to be "reasonably foreseeable" - as well as "proximity", is still very relevant to manufacturers, producers and final consumers , Can such a degree of relevance be applied to privacy matters - particularly from the perspective of digital and audit analytics? To what extent does the GDPR appropriately address the need to protect privacy and information relating to privately stored data? In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.
Donoghue_v_Stevenson
"The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer's question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question."
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