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We can understand the importance of an internal auditor by understanding internal auditing. Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.
here are the limitations of the external auditor: time lapse: lapse of time between balance sheet date and the presentation of the audit report may be up to 4 months. audit testing and selective samples: has limitations due to sampling risk Assessment of materiality: the assessment of materiality with both quantitaive and qualitative requires high degree of professional judgement Highly specialised areas: forming professional judgement in highly specialised areas can often result in disagreements between auditors and clients Report format limitations: the standard format of the audit report may not reflect fully the complexities involved in the audit process and the decision of the audit opinion. despite these limitations an audit of the financial statements adds credibility to the financial information
I think you mean an aged Accounts RECEIVABLE report.If you are familiar with auditing, the auditor needs to perform a risk assessment and satisfy certain assertions with regard to accounts. One assertion for Accounts Receivable (A/R) is Valuation & Allocation, which basically asks the question, "Is the account valued correctly?"The auditor must perform tests and gather audit evidence to satisfy this assertion, one procedure includes examining a company's aged A/R report, which list the company's customers that owe money to the company. The report states which balances have been owing for different lengths of time, and normally an estimate is made to determine what values of A/R is uncollectible.If the company has not made an appropriate adjustment to account for these uncollectible amounts, normally the auditor will suggest that an entry is made to do so, or else the account is not valued correctly. If management refuses the entry, the auditor would have to decide how their audit opinion would be affected.
Inherent Risk, Control Risk and Detection Risk
Client viabilty Inherent risk: Tone at the top Audit risk of specific assertions Analyticals Information systems
Business risk means the amount of money and reputation that a business stands to lost. It is important for an auditor to assess the risk in order for the business to avoid heavy losses.
Incorrect sampling is giving account of erroneous information. An example of incorrect sampling is an audit of merchandise in a retail store by an independent person with the risk of human error. A solution to avoiding the risk of incorrect sampling in the audit would be to have a team execute the task so information can be compared.
handling of invoices,files and errors in invoices
no impact
1).There may errors (Producer's and Consumer's risk) associated with the sampling. 2).The sample does not provide 100% accurate information of the condition of the bacth.
Osmo Kolehmainen has written: 'Contributions to two-stage sampling' -- subject(s): Sampling (Statistics) 'The effects of taxation on investor's risk-taking' -- subject(s): Decision making, Income tax, Investments, Mathematical models, Risk
Course of Action Comparison
Risk complexity and timeline
Inherent Risk is embeded in the Model or the structure of the Company, such as Banks and financial institutions have an inherent risk of Robbery as cash is being handled at high volumes.This cant be controlled due to the basic structure of the business. The Auditor can not change this risk due to its embeded nature. Control Risk on the contrary is the Risk due to Internal Control implemented in order to minimize material misstatements. Management designs the internal control system in order to prevent material misstatement occurence. Auditor again cant change this and has to tune the Detection risk based on the level of these 2 risks.
There may be other considerations, especially the risk.
SAME HERE
Analytical procedures are "one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures." So essentially these are the procedures that an auditor goes through to look at risks within the business.