Question

How should the audit function deal with known or suspected issues?

Answer 1

First we need to look at what auditing is:

auditing is the examination of the books of books of accounts and financial statement of a firm or a company to check that they are in adherence with the generally accepted accounting principles, management policies and stated requirements.

in simpler terms auditors check the reliability authenticity of the financial statements of its client companies and see that the statements are according to the standards.

objectives of accounting:

main objective: whether the accounts of a company show true and fair view of the earnings and financial states of affairs.

subsidiary objectives: detection and prevention of errors

detection and prevention of frauds.

auditing function is a part of internal audit:

so we need to understand what internal audit is: internal audit is the independent appraisal of activities within an organisation for checking financial statements and other business practices.

now to understand how auditor deals with known or suspected errors we need to understand what rights an auditor has in this regard.

Right to obtain information and explanation: the auditor can ask for an explanation or information from the employees and officers including the managing directors and other directors of the company which he thinks is relevant for the suspicion.

as the auditor can access the minuted of meetings and attend annual general meetings if a auditor finds a suspected fraud or in-ethical or unlawful practices or he can bring this to the notice of the shareholders or necessary department of government body if need be.