RE:RE:Time to shake the Tree
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.