Auditors and their Legal and Professional Requirements (Essay Sample)

"Discuss the role of the auditor including their legal and professional requirements and evaluate why an audit is important and its benefits, limitations and Conclusion”
An auditor is defined as a person designated and authorized to examine accounts and accounting records, compare the costs with vouchers, check all elements of balance sheet and income statement and state the result. However, the auditing is a systematic review of the books, accounts, records and supporting documents of an organization to determine whether the financial statements present a true picture of concern. The auditor has a significant role in each and every organization as they report on the figures and results and drafted by the management as to their correctness and fair presentation.
The auditor has the responsibility to perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement, whether initiated by errors or fraud. Due to the nature of the evidence and the characteristics of fraud the auditor is able to obtain reasonable, but not absolute, level of assurance that material misstatements are detected. The auditor is not responsible to perform the audit to obtain reasonable assurance about misstatement, caused by errors or fraud, which are immaterial to the financial statements are detected. [Paragraph added effective for audits of financial statements for periods closed from December 15, 1997, by Statement on Auditing Standards n. 82.] Auditor responsibilities require essentially the duty to ask certain questions i.e. to make inquiries, obligation to submit a report to the company over the examined accounts, the duty to make a proclamation in terms of estimated provisions, the detection and prevention of fraud, the duty to report fraud and duty to an important clarification. To provide credibility to accounts and reports, therefore, the auditors should examine the documents available through for the detection mistakes, reveal fraud, detect any irregularity or misleading report, and evaluate the effectiveness of the system of internal control in place.
The objective of the proposed standards is to require standard accounting professionals acquire specific skills (e.g., professional knowledge, skills and professional values, ethics and attitudes) they need to perform their work as competent audit professionals. A number of sources are involved production of regulation of the audit, including national legislation, international norms, standards and professional organizations and bodies. The proposed standard is applicable not only to auditors (i.e. engagement partners with ultimate responsibility for the audit report), but also those who have a significant interest in the undertaking of the audit and are responsible for making decisions important process contributing to the overall audit opinion. Audit professionals must also, of course, filled the prescribed conditions IES 1-7 by International Education Standard for Professional Accountants. In the definition as proposed it is clear that an audit professional must be a professional accountant (i.e., a person who is a member of a body of members of the IFAC) satisfying the requirements of IES, 1-6.
Purpose that before an individual can assume the role of a professional audit, you must first qualify as a professional accountant (i.e. whether it would satisfy the requirements of IES 1-6), licensee and those with more knowledge, skills, practical work experience, values, ethics and attitudes prescribed by the regulations. This proposed standard recommends for professional expertise and knowledge required for an auditor plus what IES 2 prescribed for professional accountants. This additional knowledge is key three domains: audit of financial statements; accounting and financial reporting; and information technology. Knowledge must be at an advanced level, which is deeper than anticipated of professional accountants. Proposed standard describes the implementation and development of skills for audits of financial statements. Proposition standard requires that individuals have an internship/relevant before they have a significant involvement in a mission of verification of the financial statements. They can acquire this experience either before, during or after qualification as a professional accountant. This practical experience should be obtained under the supervision of an auditor in an appropriate organization. The experience should be in sufficient depth and duration to allow individuals to demonstrate that they have the skills and competencies required in the proposed standard. It is anticipated that, before assuming the role of a professional audit, skills and competencies of individuals are evaluated. This assessment can be made by a member body of IFAC, a third person (as a place of work evaluator, government or regulatory authority), through the process of reviewing the same level of the member organization, a firm quality control systems or a combination of these. Certain member organizations are likely to include the requirements as proposed by this standard during the qualification period. In that case, people would be considered professional auditors while qualifying for professional accounting and evaluation could be carried out immediately before qualifying.
Talking about the term Auditor, the proposed standard includes a discussion of the different licensing audit schemes and range of skills and the necessary additional competencies to move from a role of an audit professional to an auditor. Specific industries and environments the proposed standard indicates that professionals involved in audits of financial statements in particular environments and specific industries that require professional knowledge and experience relevant to the environment and industries. The standard also provides the demands of competence for professionals involved in transnational audits.
However, an auditor can be either External or Internal to an organization having an overall objective to: Obtain reasonable assurance that the financial statements as a whole are free from material misstatement, which are the result of fraud or mistake, being of the opinion that the financial statements are set according to the applicable Financial Reporting framework; and give report on the financial statements required by international auditing standards (ISA 200). Auditor of an organization with the goal of for the purpose of Non-Assurance Engagements such as: Engagements to perform agreed-upon procedures in accordance with International Standard on Related Services (ISRS) 4400; and Engagements to compile Financial Statements in accordance with International Standard on Related Services (ISRS) 4410. An auditor is to comply with all the laws and regulations that are applicable with reference to the role he/she enacts.
In fact, be independent and impartial auditor confirms that the allegations of the Organization with regard to its financial position and the process behind these statements are true and fair is useful for a variety of reasons, according to their point of view. For example: Investors and shareholders: These people own the organization, but many cases are not closely involved daily operation. Thus, once also an independent audit is very interesting for them because it provides reliable second opinion on the financial statements of the organization and, in turn, gives an overview of the way in which it is executed.
In addition, Company Accounting / Financial Management, these people are essentially deal with the finances of organization and, for them, through an audit are essentially a question of trust and tranquility. Having an independent expert led their numbers can be a bit uncomfortable at times, but the reward is to ensure that the numbers are true and righteous. These systems are generally established by the specific design of computer systems and, for example, to ensure that the authorization of transactions is controlled by the rules and clear policies. Finally, for many accountants and CFOs also enjoy working closely with auditors, thinking that might help solve complex accounting, advice on questions ranging from management processes issues of world class and follow the latest techniques, rules and regulations. Financial analysts, these people assist to determine what actions and organization are of worth and therefore its value as a whole. They do this through independent analysis and comment on its financial position both to make predictions concerning future success. For financial analysts, audited accounts are an essential tool because they provide objective information and to support its work independently checked. Also Regulators, these independent bodies are responsible for overseeing the wide range of industries to make sure that individual companies operate fairly and legally. They can use the audited accounts in the context of the continuous monitoring of each company or to facilitate more specific surveys.
The localization and error correction is possible through an audit. The discovery of the fraud is possible through audit. The authors can be held responsible. The audited accounts reveal fair presentation. Lenders ready accept the accounts of the auditors. The reputation of borrowers increased because of the audit. And audited accounts enables employer to extend their activities. People can refer to the Auditors. The auditors are professionals and know their job very well. You can put higher consideration to the gray area. There exists a moral check on management and other staff. Audit puts pressure on staff that has to work honestly. When there does not exists remaining work is therefore less chance of errors and fraud. This management can play a dynamic role in the d...