Auditing
Auditing has been around since the mid-1800's, which originated in British. Some of firms today have been around since the 1800's, such as Deloitte & Co. Price Waterhouse & Co. In this paper, I will state the functions of auditing, the nature of auditing, how the standards apply to financial, operational, and compliance audits, and some other items that pertain to auditing in general.
Nature of Auditing
The nature of auditing is that auditors are placed with a special purpose, which is to provide credibility to the information that is reported on the financial statements, along with any other audits that are done by them. "The importance and comprehensive nature of auditing place a special responsibility on public officials or others entrusted with public resources who authorize or arrange audits to be done in accordance with these standards. This responsibility is to provide audit coverage that is broad enough to help fulfill the reasonable needs of potential users of the audit report. The comprehensive nature of auditing also highlights the importance of auditors clearly understanding the audit objectives, the scope of their work to be conducted, and the reporting requirements" (gao.gov, 1999).
The functions of auditing are that it "measures and evaluates the effectiveness of the various types of controls and may also properly be concerned with matters of the operating nature" (ofm.wa, 2006). Most audits, once done, will provide a written report stating their findings and what controls need to be put in place, if there is some missing. It is up to the management to make sure these controls start getting done.
When working at Sonic Corp. we had internal auditors, along with external auditors auditing how we did things in the Tax Department. The internal auditors would sit with you and see how things were done, ask quite a few questions. They were wanting to make sure all the controls were in place, correct signatures on the returns, the journals, who checked what and how often, etc. Now with the external auditors, they would pull returns from prior years, and different stores to make sure the numbers were the same as what was reported on the returns. If there were any discrepancies, then they would have to be noted, such as why the gross earnings of the store were more then what showed in the system.
Elements of the GAAS
There are many elements that are involved within the Generally Accepted Auditing Standards.
In order to ensure an organization’s financial order, auditors with international standards are a vital part. However, very few auditing companies exist in Afghanistan that can provide auditing services in compliance with international accounting standards. Fortunately, ACC is one of those few auditing firms that can confidently say that its auditing services are in the highe...
Individual Article Review Lily Cobian LAW/421 March 31, 2014 Ramon E. Ortiz-Velez Individual Article Review Introduction My article review is based on Sarbanes-Oxley and audit failure, a critical examination why the Sarbanes-Oxley Act of 2002 was established and why it is not a guarantee to prevent failure of audits. Sarbanes-Oxley Act talks about scandals of Enron which occurred in 2001 and even more appalling the company’s auditor, Arthur Anderson, found guilty of shredding company documents after finding out Enron Company was going to be audited. The exorbitant amounts of money auditors get paid to hide audit discrepancies was also beyond belief. The article went on to explain many companies hire relatives or friends to do their audits, resulting in fraud, money embezzlement, corruption and even the demise of companies. Resulting in the public losing faith in the accounting profession, the Sarbanes-Oxley Act passed in 2002 by congress was designed to restrict what company owners and auditors can and cannot do. From what I gathered in the article, ever since the implementation of the Sarbanes- Oxley Act there has been somewhat of an improvement but questions are still being asked as to why there are still issues that are not being targeted in hopes of preventing more audit failures. The article also talked about four common causes of audit failure: unintentional auditor mistakes, fraud, fatigue and auditor client relationships. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct clearly states an independent auditor because it produces a credible audit, however, when there is conflict of interest, the relation of a former employer, or a relative or even the fear of getting fire...
to be loyal or favorable in their reporting towards the client. The auditor’s obligation is to repor...
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
If there is any risk of management override, the auditor is required to exam the journal entries, check accounting estimates for biases that cause of fraud, and evaluate the significant transactions which is not in the regular business
The. Loughran, Maire. Auditing For Dummies -. Hoboken: Wiley Publishing, 2010. Print.
Accounting ethics has been difficult to control as accountants and auditors must keep in mind the interest of the public while that they remain employed by the company they are auditing. The accountants should take into account how to best apply accounting standards when company faces issues related financial loss. The role of accountant is crucial to society. They serve as financial reporters to owe their primary constraint to public interest. The information provided is critical in aiding managers, investors and others in making crucial economic decisions. An accountant is responsible for any fraudulent financial reporting. Some examples of fraudulent reporting are:
Also, as a part of their job, they should carry out regular audits to ensure funds and resources are utilized
...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 fundamental duty of an external financial auditor is to form and express an opinion on whether the reporting entity’s financial statements are prepared in accordance with the relevant financial reporting framework. In discharging this duty, the auditor must exercise “reasonable skill, care and caution” (Lopes, J. in Kingston Cotton Mill Co 1896) as reflected in current legal and professional requirements.
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.
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
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...
The major characters of the tradition audit are all information what is needed by auditors are on the paper and the manual calculators and without high communication technology. Auditors usually were limited by the place in the paper time. When a several people are working on the same auditing project for a client with offices in cities across the country, even worldwide, it takes a lots all time those auditors get the information which they need from the client, even there is risk paper information disappear for many reasons. on the another hand, mail paper information increase the auditing cost. The mistake caused by the manual calculators inevitably, no matter how fixed auditors concentrate on recalculate is, after all auditors are human. The global business become major in the modern business world, some example, several auditors who are in different locations are working a same auditing project, or auditors are in different city even country with the client, when there is issue among these auditors or between auditors and client, they only can communicate with each other by phone or be together and have meeting. Phone call can not make sure information been watched in the same time when the voice is talking about the issue, but having a meeting takes time and money make all people together, it increases auditing cost.
An auditor is who officially and carefully consider and measure the accuracy of business record and financial statement (Oladipupo, 2005). An auditor could be internal, external auditor, or independent auditor in the public or private sector. An auditor is allow to work for different entities