What is the basic primary role and responsibility of an independent external auditor?
Show
External auditors review financial statements to ensure they are a ‘true and fair’ account of past financial performance and current financial positionWhat is an external auditor?By law, many commercial and non-profit organisations around the world must be independently audited. To meet this requirement, external auditors review financial statements to ensure they are a ‘true and fair’ account of past financial performance and current financial position. Specialising in auditing doesn’t limit you to finance though. You could undertake a wide range of audit types, such as checking that organisations meet legal and voluntary obligations in health and safety, IT and social responsibility. After completing an audit, the organisation’s management team must review your findings to ensure they are adhering to rules, codes of practice, business ethics, internal guidelines and principles. How do I achieve it?External auditors must be qualified accountants and a member of a professional body such as ACCA. After qualification, there is often a clear progression from junior through to senior roles. Aspiring external auditors will benefit from taking the following ACCA Strategic Professional Options exams:
Getting the right experience will also help you to progress your career. Indeed, many firms provide students with work experience within their audit teams. Duties and responsibilities of an external auditor External auditors must be independent of the company to ensure an effective application of auditing techniques. They are expected to perform their function with analytical thinking, professional competence, professional behavior, and a higher degree of integrity. Following are some of the duties and responsibilities of an external auditor.
External audit best practicesThe external audit is a sensitive area where auditors need to engage with due professional care and attitude. The auditors perform their duties and own duty of care to shareholders and other company stakeholders. Adoption of external audit best practices helps them in the smooth flow of the audit in terms of planning, execution, and reporting. These best practices help smooth the flow and completion of an audit and organizational strategies to improve risk management, reduce errors, omissions, misstatements, and enhance overall business efficiency. Following are some of the external audit best practices. 1-Make a robust audit plan.A comprehensive and robust audit plan helps achieve the completion of an audit with higher efficiency. From the perspective of external audit, making a plan refers to thorough business and control understanding to identify gaps/weaknesses in the business processes, policies, procedures, and quality of evidence. The best part of the risk-based approach is that efforts are directed and allocated systematically. This helps in the coverage of the audit risk efficiently with an application of the minimum risk. Overall, audit planning is about risk assessment; this can be done via business understanding, industry understanding, market understanding, and control understanding of the company. 2-Set the scope of audit activitiesAppropriate scoping is one of the best audit practices and refers to planning for the,
An important point to note is that scoping needs to be done with appropriate techniques and a logical mind leading to questioning behavior. 3-Make sure to select a representative sample.Auditors are not able to test an entire population. Instead, there is a need to select a representative sample from the population. This can be done by applying a systematic approach to extract samples. However, auditors need to ensure all balances in the population have equal chances of selection. The sampling technique must extract data from the whole population. For instance, a population must be complete and not missing data in any form. 4-Thorough evaluation of internal controlsOrganizational operations backed by sound internal controls have higher efficiency and lower errors. So, if the auditor concludes that internal controls applied by the company are sound and strong, it can be used as evidence and reduce the overall sample size. So, the best practice would be to perform a walkthrough on the controls and ensure the correct conclusion is drawn. This would include interviewing staff about the controls, overall control environment, commitment of senior management with the control processes, control effectiveness, relevance, and the level of risk, the applied controls can mitigate. 5-Maintain constant communication with the audit clientMiscommunication or lack of communication is the main cause of delay or inefficiency of audit activities. Auditors need to understand they are here to help management achieve organizational goals. Likewise, company management and staff need to cooperate and understand auditors are not to pick their mistakes and highlight them. Instead, their purpose is to improve overall controls and related procedures. 6-Properly document every assessment and procedure performedIn the world of auditing, it’s said that work not documented is the work not performed. So, you need to ensure all management interviews, queries, misstatements, and corrections are adequately recorded in the working papers. Proper referencing can be an excellent way to trace the movement of balances and supporting evidence. Further, audit working papers should clearly explain all audit programs, risk coverage, details of the procedures performed, referring evidence, and the conclusion. 7-Do not compromise on professional development.It has been noted that auditors are busy creatures and need to ensure the completion of engagement on a timely basis. So, they do not have much space to focus on professional and self-development. However, it should be understood that audit is an ever-evolving field with the inclusion of technological advancement in terms of accounting standards, reporting frameworks, and risk assessment techniques. This makes it necessary for the auditors to continuously update in terms of technical competence, soft skills, communication, analytical thinking, and enhance understanding in line with the innovation and changes in IT and software. In addition to this, audit firms need to conduct workshops and training to ensure knowledge and understanding of the team is up to the required quality mark. External audit committeeAn audit committee comprises of the board of directors, and the majority of directors must be independent of the company. They are responsible for overseeing overall financial reporting processes and operations. In the United States, public trading companies must have an external audit committee to enhance the reliability of the following managing aspects.
Final thoughts for duties and responsibilities of external auditorThe responsibilities of external auditors include understanding business, understanding controls, risk assessment, the performance of audit procedures, and collection of audit evidence etc. The external auditors perform work on behalf of the shareholders and assess if there are material misstatements/omissions in the accounting record and financial reporting process. The audit performed by implementing the best practices is expected to produce a higher degree of accuracy. The best practices to perform audit include but are not limited to making a comprehensive audit plan but setting the scope of audit activities, selecting a representative sample, evaluation of controls, documentation of audit-related activities, continuous professional development etc. For further reading on external audit aspects, accaglobal is an excellent resource. Frequently asked questions for duties and responsibilities of an external auditorWhat are the impacts of Sarbanes Oxley -SOX on the audit committee? Following are some of the impacts of Sarbanes Oxley –SOX on the audit committee. What are the primary responsibilities of the audit committee? Following are some of the primary
responsibilities of the audit committee, What are the main duties of an external auditor? Following are some of the main duties of the external auditor. What is the primary role and responsibility of independent external auditors quizlet?External auditors play a big role in helping financial statement users receive unbiased, reliable financial information. They serve independently from any client they perform an audit on, so they can objectively review the internal controls and financial statements of a company.
What is the role of an independent auditor?An independent auditor will examine financial statements and other data assessing business operations and procedures. As part of an audit, they may discuss questions with management and staff to gain a better understanding of the way the business operates.
What is the primary purpose of an external audit?The purpose of an external audit is to provide an objective independent examination and to verify that the financial statements provide a true and fair reflection of where the company financially and have been appropriately prepared in accordance with accounting standards.
|