|Type of paper:||Essay|
|Categories:||Government Budgeting Money Marketing plan Business communication|
In a free market, there exists no government agency involved in the transaction process. The goods and services are sold with little or no overall control (Harris, 2014). The government agency does not get involved in market activities. Firms and households act in self-will in a free market economy in determining how resources will be allocated, the people responsible for buying goods, the kind of products to be produced. The general working of a free market economy society goes contrarily to the government economy in which the government is responsible for the profit gained from a particular product or service. A free-market economy can only exist where there is accurate and reliable data on a specific product.
Background Information on a Free Market Economy
A free-market economy promotes consumer Sovereignty, and producer scale down their products to what consumers can readily afford. The consumer is presented with a wide range of choices to choose. Free-market allows entrepreneurs to make their own decisions on the products they intend to make. In this case, innovative and inventive entrepreneurs make new products to suit their customers as well as attract more customers (Harris, 2014). through the concept of an invisible hand which deals with how demand act as a signal to the consumers who willingly produce products to accommodate the willing customer needs
The indispensable role of the auditor in a free market economy
Auditor plays an essential role in the open market economy; it is the duty o the auditor to guarantee the statements presented to society are real reflections of the current financial condition of a company. The auditors ensure that the explanations provided are following the set by the (PCAOB) Public Company Accounting Oversight Board. Harris 2014, suggests that "Without accurate and reliable corporate disclosures and financial statements, and competent auditors to audit them, our competitive free-market system could not function properly."
Some risks associated with finance may arise in a free market economy such as fraud or falsified. Companies such as Global Crossing, Adelphia, and Tyco, World.com, and Enron investors lost trust in these corporation auditors concerning the statement produced. Loss of confidence to the auditors resulted in an abrupt drop of about 22% or 2400 points between April and July in 2002 (Harris, 2014). Due to such scandals, bodies such as the PCAOB and Sarbanes-Oxley Act had to be restructured (Harris, 2014).
The auditor is responsible for safeguarding against acts like fraud by ensuring 100% statement transparency is given to the public (Harris, 2014). For the smooth running of the organization, there is a great need for investors to have a clear understanding of the financial state of a particular organization. Understanding the financial condition of a given corporation ensure the capital is informed instead of investing in a dead company which hurts the economy.
Due to the risk associated with the free-market economy, such as fraudulent and other behaviors, an auditor intervention is indispensable to a free market economy. Investors and the public generally keep their trust on the investor either directly or without their whereabouts. The auditor must be trustful and provide a piece of accurate information to the public, "Without counsel plans fail, but with many advisers, they succeed" (Proverbs 15:22, ESV). The auditors should always work to ensure that they maintain the trust which the public and the investors have put on them.
Free market economy. (n.d). Investopedia.com Retrieved from http://www.investopedia.com/terms/f/freemarket.asp#ixzz3uJqNRTXU.
Harris, S. (2014). The Importance of Auditing and Audit Regulation to the Capital Markets. Retrieved from http://pcaobus.org/News/Speech/Pages/03202014_American.aspx.
The Holy Bible. English Standard Version. 2001. Wheaton, Illinois: Good News Publishers.
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