Introduction:
The process by which something is examined with a view to an opinion being formed. The definition most widely practiced within the profession is that put forward by the APB- ‘independent examination and expression of opinion’. This allows others to gain assurance that any information or a process can be trusted. The main purpose of the audit is to provide shareholders of the company with experts, independent members with a true and fair view of the company's annual financial account and position. Independent is one of the audit trails that show that he can perform his duties objectively.
Meaning of external auditor:
The role of auditing is divided into two, namely internal audit and external audit. Internal audit works in a company organization and reports to committees or directors. They assist in company development and risk management within
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Some internal auditors also have no experience in accountants. Consequently, they cannot accurately audit the financial statements of their companies. The external auditors may review the financial statement statements prepared by the internal auditors. They can also train internal auditors by applying accounting principles that explain the differences in analysis between internal and external auditors.
Critique Internal Processes: Internal audit cannot effectively criticize the company's internal processes as part of a company. Whereas, the external auditors may at any time criticize the companies they audit independently and without fear of the company. They are observing the outside operation where money and time are spent. External audits often criticize accounting practices and general operations. They can tell how to avoid wastage by promoting better efficiency and tightening accounting practices.
Contribution
Nurul Syakila Binti Abdul Rahim (DBS
The purpose of the internal audit is to protect Costco 's assets through evaluating the acceptability and efficiency of internal controls; recognizing areas of possible risk, revenue improvement and/or cost reductions; and making sure transactions are authorized, completed, and logged as proposed. The internal auditors are accountable for guiding audits of all Costco’s local and global activities, its affiliates, and other entities Costco conducts business with as deemed necessary by management.
The audit committee must certify that the company’s auditors are independent. The audit committee must approve all professional services provided to the company by its independent auditors and ensure that auditors do not provide to the company any of the specifically prohibited services identified by SOX, such as bookkeeping services. The audit committee must receive and analyze key items of information from the independent auditors. These items of information include auditors’ analysis of critical accounting policies adopted by the
Consult PCAOB Ethics and Independence Rule 3520. What is the auditor independence, and what is its significance to the audit profession? What is the difference between independence in appearance and independence in fact?
According to PCAOB Auditing Standard 5 paragraph 2, “effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. If one or more material weaknesses exist, the company 's internal control over financial reporting cannot be considered
The independence rules require that auditors refrain from investing in companies that they audit, to ensure objective, truthful reporting and opinion. The rule applies to all auditors, their relatives, spouses, dependents, non-dependents, and, in some cases, associates must disclose all holdings.
Reporting independence is extremely important because it is the main objective of auditor’s independence, the prevention of any client influence on the outcome of what is to be reported. It is crucial for an auditor to not feel any need
The independence of mind or independence in fact means Betty has to have a state of mind that allow her to form an opinion without bias due to influence that compromises professional judgment. By having an independence of mind allowing an individual to perform his or her audit work with integrity, as well as, maintaining her objectivity and professional skepticism behavior. However, in this case, she did not have an independence of mind since she trusted Toby and she enjoyed working with him since he is also a CPA because it is easy for her to work with him compare to her other clients who do not have the accounting background. As a result, because of long-term relationship and trust that Betty has with Toby, it influenced her decision about the audit opinion. Additionally, to be independent in appearance Betty and her audit team must show unbiased professional judgment when she reviews her clients ' financial statements. Betty had Problems with independence in appearance because in the case study shown me that she has become too close to her client, Toby. Therefore, all auditors have to maintain their professional skepticism as well as maintain independence in their mental attitude and also independence in appearance to provide an unbiased opinion on
Objectivity also needs to be evaluated to make sure the internal audit is reliable. The internal audit needs to be free of conflicting responsibilities as well
It is important to test internal controls, in many cases audit fails due to lack of identifying the key control that must be tested by engagement team. Also the audit fails if wrong control was
Both roles should ideally be independent of operations, but corporate compliance in reality owns the compliance operation policies and procedures. Internal audits have to be completely Independent. Internal audits also bring attention to the need for monitoring as a result of their auditing function. Corporate compliance ensures that monitoring and auditing occur. As far as follow-up goes, corporate compliance is responsible for such things, while internal audit is just responsible for reporting whether management responded appropriate to obtained information. Both roles are involved in compliance risk. Corporate compliance creates and implements a compliance plan to ensure that compliance risks are addressed. Internal Audit on the other hand, addresses compliance risks as part of risk based audits.
Throughout the years, the news covered stories of corporate scandals involving unethical accounting practices. These unethical corporate acts had a tremendous negative impact on these company’s stockholders, investors, employees and the whole U.S. economy. Most of these scandals would have been prevented, if the independent audits of these companies were conducted in an ethical manner. With this in mind, two corporate scandals will be the subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process. An auditor should keep objectivity at all times.
...e financial reports and statements are correct. This auditing will be conducted by auditing department of the organization, even may be done by an independent auditor who is not part of the organization, and sometimes public officials are elected. In case of unmatched consequences the organization need to give explanation on the misrepresentation of wrong statements. Auditors purpose is then to ensure that the misrepresentations are corrected, then maintain accurate, reliable financial documents and statements.
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.
The Auditor-Firm Conflict of Interests: Its Implications for Independence: A Reply. By: Goldman, Arieh; Barlev, Benzion. Accounting Review, Oct75, Vol. 50 Issue 4, p857-859, 3p
Audit is a process to evaluate and review the accounts and financial statement objectively. We can divide it into internal auditors and external auditors. Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco...