Question

Sarah O’Hann enjoyed taking her first auditing course as part of her undergraduate accounting program. While at home during her semester break, she and her father discussed the class, and it was clear that he didn’t really understand the nature of the audit process as he asked the following question

What does the auditor do in an audit other than verify the mathematical accuracy of the numbers in the financial statements?

Answer 1

First of all there can be 2 types of auditor, 1) Independent External auditor 2) Internal auditor.

An auditor has many roles other than verifying the mathematical accuracy:-

Role of an Independent External auditor in an audit:-

- The objective of external auditor in an audit is to express an opinion whether an entity's financial statement present fairly, in all material respects in confirmty with the applicable financial reporting framework.

- The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.

- The independent auditor also has a responsibility to his profession, the responsibility to comply with the standards accepted by his fellow practitioners.

- He has a duty to obtain and evaluate the audit evidence he has obtained while auditing the company.

- For listed companies, he should ensure that companies are using the appropriate internal control policies and procedures.

- He should also obtain an understanding of the entity and the environment including the internal control.

- He should be independent in fact and mind and should not be bias while conducting the audit.

Role of an Internal auditor in an audit:-

- Internal auditors evaluate the risks and the adequacy and effectiveness of controls regarding

a) Reliability and integrity of financial and operational information.

b) Effectiveness and efficiency of operations.

c) Safeguarding of assets.

d) Complaince of laws, regulations and contracts.

- Internal auditors may or may not be independent.

- They should have more comprehensive knowledge about the business than the external auditor.