What are the Responsibilities of the external auditor?

Answer 1

External Auditors' Roles and Responsibilities

An external auditor is an independent service provider whose impact can provide significant influence on the organization being audited and its stakeholders. Even though they are not part of the organization, they play a key role in developing internal control. Auditors can comment on weaknesses in the accounting records, systems and controls that they review in the audit. They provide a statistical analysis on the clarity and effectiveness of the accounting policies put in place by the company. They also help management become aware of evidence that may affect future audits. They can give advice management through recommendations in their audit notes or discussions. Constructive suggestions can improve the procedures for documentation more efficient, ethical, or fairly presentable.

The roles and processes of an external auditor can vary from country to country. Due to the significant developments of FASB merging with IASB, perhaps soon enough experts from around the world can follow another's work without discrepancies. Until that day, auditors must have knowledge of the particular countries audit procedures as well as the business they are working with. External auditors do not have the benefit of working with the company on an everyday basis. A significant effort must be made to familiarize themselves with the company or the industry. This may be done through extensive training, study of the workings of the industry, to questions made to management about their operations. This is essential for a successful audit review.

A cornerstone of the difference between an internal auditor and an external auditor is company-wide independence. An external auditor must have independence. When reviewing a company's financial statements cannot have any close ties with the company. This means no stocks, close relatives with stocks, management positions, etc. This policy was put into place to ensure a total objective review in which influences would not affect the outcome of the audit. Situations of this matter may be obvious; however sometimes there are various shades of gray. When in doubt, speak to a supervisor and use your best judgment! Sometimes it is better to not take the case if the auditor's independence can be compromised.

The primary purpose of an audit is to review and verify the company's financial statements to form an opinion about the company's financial statements. They may give a qualified, unqualified, adverse opinion or even a disclaimer. Each one of these opinions can be vital for an organization. These opinions state whether the financial information was justly represented, misleading, or insufficient enough to form an opinion. Stakeholders can be influenced greatly by an audit. It may mean the difference on the company getting a bank loan or for an investor to bring in capital. These statements tell the public if the company is truthful and open with their financial information or if they seem to be hiding something they do not want anyone to see. External auditors are the police and judges of the financial public affairs. The goal is a safe and sound set of financial statements to protect private and public investment.

Internal Auditors' Roles and Responsibilities

An internal auditor's job is vital to a company. The desire of an internal audit staff is to look at the overall strategic goals of the company and help them excel in a reliable and ethical manner. They evaluate and improve the company's systems of compliance, control, and risk assessment. With this review, the company can safely carry out its operations with reasonable confidence. Reviews made to internal control and risk management identify areas that need improvement. Recommendations are made to the proper personal to develop better business practices and performances. In these procedures, the storage of information and security is tested for effectiveness. Though the information gathered for financial statements needs to be transparent, the protection of customer sensitive information must be held in the utmost respect of the company. The internal auditor may make suggestions on how to better safeguard this information from being accessed by persons other than necessary personal.

An internal auditor must develop a strong understanding of the company it works for. Levels of experience, training, and education help the auditor assess business situations for better evaluation. All auditors must continue their education throughout their career to keep themselves up to date on new and innovative accounting procedures, especially in the years soon to follow. An auditor must also understand their limits. When in doubt, ask questions! An internal auditor should meet with legal counsel to verify compliance with regulations and laws. IT specialist can keep the company current with any safeguards the company can benefit from. They should work with the external auditors to improve auditing practices. Consultants can be useful for the company's future planning. These third parties can be a benefit to any internal auditor. They can provide necessary information to further evaluate the effectiveness and efficiency of the company.

Communication is important. There should an open flow of information between the auditor, audit committee, and management. This helps to avoid mistakes and miscommunications. This also considerably improves the auditors fair and objective work quality. With the increased protection for whistleblowers, an open communication can evaluate any allegations of fraud within the company. Fraud may be investigated and brought to justice faster and more cost effective if the information is freely transmitted between the related parties. An internal auditor's primary function is to evaluate and improve the company's finances and accounting procedures to ensure safe and ethical practices are conducted within the regulations of the law and related governances.