Auditor of the Company

Introduction An auditor is a type of accountant. The main job of the auditor is verification of a company's financial records. Auditors study various sources to find out whether a company's records present its true financial situation. They check the company's bookkeeping and accounting methods by analyzing its books and records. They compare the company's books with the records of the banks, brokers, creditors, and others who deal with the company. They check the books of the departments within the company as well. These objective analyses and reports often help management cut costs, save on taxes, and increase profits. There are two types of auditorsexternal and internal. External or independent auditors work for public accounting firms or are self-employed. Businesses, industries, and government agencies contract with auditors to verify and certify their financial statements. Well-run companies usually have their books audited once a year. An independent audit gives shareholders and creditors an outside, expert opinion of a company's financial condition. The work of internal auditors is similar to that of external auditors, but internal auditors work for and receive a salary from one company. These auditors examine and evaluate the financial system of their firm to ensure that it is being run efficiently and economically. They examine all financial records, including accounting books, payroll records, and equipment and inventory records. They submit reports to management on how well accounting policies are working and where changes should be made. The directors appoint the first auditor of the company. The auditor then holds office until the end of the first meeting of the company at which its accounts are laid before the members. At that meeting the members of the company can re-appoint the auditor, or appoint a different auditor, to hold office from the end of that meeting until the end of the next meeting at which accounts are laid. Private companies can also pass an elective resolution dispensing with the need to appoint an auditor every year. If that happens, the auditor already appointed remains in office

without further formality until a resolution is passed to re-introduce annual appointment or to remove him or her as auditor. The auditor will check the accounts and accounting records of the company and prepare a report for the company's members. The report will say if the company's annual accounts have been properly prepared in accordance with the Companies Acts and if they give a true and fair view of the company's financial affairs. The auditor will also consider if the information given in the directors' report is consistent with the annual accounts. If in the auditor's opinion, the accounts or directors' report does not comply with the Companies Act, the auditor will say so in the report. External Auditor External auditor is an auditor independent from the entity, appointed to express an opinion on an accountability matter. And External auditor is an audit professional who performs an audit on the financial statements of a company, government, individual, or any other legal entity or organization, and who is independent of the entity being audited. External auditor must be highly qualified person like, chartered accountant, cost and management accountant.etc; The purpose of external auditors are to audited the company annual reports with carefully and with responsibilities and provide the true and fair information to stakeholders of the company.

Power and Duties of External Auditors

An external auditor performs independent, third-party reviews all the financial records of a company or corporation. The auditor evaluates all accounting, payroll and purchasing records, as well as any documents related to investments, stocks or loans. Auditor job is to provide an accurate, unbiased analysis of the companys financial condition. The objectivity of an external auditor is imperative for him to be successful. No connection to the company is permitted, as it may be construed as biasing the auditors report. This detachment generally means auditor cannot be a friend or relative of any owner, manager or employee. They must not hold stock in the company or have any monetary stake in any of their subsidiaries or holdings.
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 To be fair and equitable, an external auditor should familiarize himself with the nature of the business he is auditing prior to starting the job. For example, service industries and consumer goods companies have markedly different expenses as well as disparate methods of calculating profits and losses. Being aware of these differences is important for his conclusions to be accurate and constructive. Businesses often depend on an external auditor to be their financial judge and jury. They findings strongly influence the companys reputation in both the private and public sectors. If they conclusions about assets, debts and tax responsibilities and payment do not match those on the company records, the repercussions can be serious.

The auditors responsibility to consider fraud and error

If an external auditor finds irregularities, he documents them and makes notes on suggested improvements. These may relate to accounting methods, internal controls or spending habits. Other areas of concern commonly relate to how employees are classified and paid. For example, companies sometimes incorrectly categorize jobs as exempt, not requiring overtime pay, when they are actually non-exempt positions. He may also make suggestions on reducing overhead through staff reductions or better inventory control. In some instances, an external auditors services are required by shareholders that have doubts about the accuracy of a companys financial claims. If he finds evidence to support their suspicions, he is typically bound to report them. The company is generally given the opportunity to defend their position either in writing or in oral presentations. Once the auditors job is completed, he presents his findings to management. The areas his report normally covers include the state of accounts payable and receivable as well as his opinion of the record-keeping systems and the companys financial strength. His comments on these topics are generally expected to be constructive and include recommendations for improvements. Most external auditor positions require the applicant to be a certified public accountant. Other jobs may require a bachelors degree in accounting or finance. Experience in auditing, financial analysis or business administration is also valuable. External auditors are employees of a public accounting firm which has been engaged to conduct the audit of a particular company's financial statements (audit client). The
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external auditor's responsibility is to provide assurance to the general public regarding the truth and fairness of the information presented in the audit client's financial statements. Since the public relies heavily upon an audit opinion published by a public accounting firm to make investment decisions, it is imperative that they view accounting firms as being independent, objective and free from the influence of the audit client or any other parties. Indeed, some authors have gone as far as to say that this assurance is the basis of the world's capital markets. Overall approach to the detection of financial fraud Fraud-related inquiries Response to fraud risk factors Financial statement misstatements Fraud associated with management override of controls

Consideration of laws and regulations

When planning and performing audit procedures and in evaluating and reporting the results thereof, the auditor should recognize that noncompliance by the entity with laws and regulations may materially affect the financial statements. In order to plan the audit, the auditor should obtain a general understanding of the legal and regulatory framework applicable to the entity and the industry and how the entity is complying with that framework. Further the auditor may also identify instances of noncompliance by inspecting correspondence with the relevant licensing or regulatory authorities. The auditors report The auditor should review and assess the conclusions drawn from the audit evidence obtained as the basis for the expression of an opinion on the financial statements. The auditors report should contain a clear written expression of opinion on the financial statements taken as a whole.

The auditors report should includes (a) title e.g. auditors report(b) addressee as required by the circumstances of the engagement and local regulations e.g. members of the company (c) introductory paragraph to identify financial statements audited and a statement of the responsibility of the entitys management and the responsibility of the auditor (d) Scope paragraph to give reference to the ISAs or relevant national standards or practices and the description of the work the auditor performed (e) Opinion paragraph (f) date of the report (g) auditors address and (h) auditors signature. In certain circumstances, an auditors report may be modified by adding an emphasis of matter paragraph to highlight a matter affecting the financial statements which is included in a note to the financial statements that more extensively discusses the matter. The addition of such an emphasis of matter paragraph does not affect the auditors opinion. Auditor should express qualified opinion when he concludes that an unqualified opinion can not be expressed but that the effect of any disagreement with management or limitation on scope is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion. Internal Auditor Internal auditors verify the accuracy of their organizations internal records and check for mismanagement, waste, or fraud. Internal auditing is an increasingly important area of accounting and auditing. Internal auditors examine and evaluate their firms financial and information systems, management procedures, and internal controls to ensure that records are accurate and controls are adequate to protect against fraud and waste. They also review company operations, evaluating their efficiency, effectiveness, and compliance with corporate policies and procedures, laws, and government regulations. There are many types of highly specialized auditors, such as electronic data-processing, environmental, engineering, legal, insurance premium, bank, and health care auditors. As computer systems make information timelier, internal auditors help managers to base their decisions on actual data, rather than personal observation. Internal auditors also may recommend controls for their organizations computer system, to ensure the reliability of the system and the integrity of the data.

Duties and responsibilities of Internal Auditor

To work with trustees and management to ensure a system is in place which ensures that all major risks of the charity are identified and analyzed, on an annual basis

To plan, organize and carry out the internal audit function including the preparation of an audit plan which fulfils the responsibility of the department, scheduling and assigning work and estimating resource needs

To report to both the audit committee and management on the policies, programmed and activities of the department

To coordinate coverage with the external auditors and ensure that each party is not only aware of the other's work but also well briefed on areas of concern

To make recommendations on the systems and procedures being reviewed, report on the findings and recommendations and monitor management's response and implementation

To review and report on the accuracy, timeliness and relevance of the financial and other information that is provided for management

To work with management to ensure a system is in place which ensure that all major risks are identified and analyzed, on an annual basis

To report on the value for money that the charity obtains in all its activities with special regard to economy, efficiency and effectiveness

To conduct any reviews or tasks requested by trustees, the audit committee, chief executive or finance director, provided a such reviews and tasks do not compromise the independence or objectivity of the internal audit function

To provide both management and the audit committee with an opinion on the internal controls.