Internal Audit Board, executive management. External Audit Investors, customers, public interests, or regulators. Internal Audit Interdisciplinary. External Audit Accounting, finance, tax, compliance. Connect With Us. GRC Software Suite. Consulting Services. About Us. Bureau of Labor Statistics 's job description for auditors. Publicly traded companies are required by the U. Securities and Exchange Commission to have financial records audited regularly by an independent outside accounting and auditing firm.
The SEC requires financial statements that are "accurate, truthful and complete. Besides checking financial statements for accuracy, an auditor reviews a company's accounting methods and procedures to substantiate that the company follows steps to prevent fraud. The auditor verifies a company's internal rules for signing checks, making payments to vendors and handling deposits.
Peer Review results also indicate that some auditors believe they can lower their control risk assessment without testing whether the controls are operating as designed, but that's not true. If the auditor's response i. Evaluating control design and implementation is not the same thing as testing the operating effectiveness of those controls. Many auditors confuse the terms "implementation" and "operating effectiveness," but as paragraph. A77 of AU - C Section states, "obtaining audit evidence about the implementation of a manual control at a point in time does not provide audit evidence about the operating effectiveness of the control at other times during the period under audit.
Once the auditor has assessed the risks of material misstatement including risk associated with the client's internal control, his or her next step will be to design and perform further audit procedures that are responsive to the client's risks. The auditor should not simply perform the same procedures that were required for another client in the same industry or even those audit procedures performed in the prior year.
To illustrate, consider two clients in the manufacturing industry. For both clients, the auditor has assessed the risks of material misstatement related to the rights and obligations assertion in the accounts payable balance as maximum.
Client A's bookkeeper records all invoices in the accounting system once the invoice is received. Because the invoices are not matched to a purchase order or otherwise reviewed to confirm their validity, the auditor determines that Client A's controls over the recording of accounts payable are ineffectively designed.
A specific concern is the risk of recording fictitious invoices. Alternatively, Client B's bookkeeper records all invoices for authorized purchase orders in the accounting system when the invoice is paid.
Because recording of invoices is delayed until payment occurs, the auditor determines that Client B's controls are ineffectively designed because a risk of unrecorded liabilities exists. While both clients are in the same industry and both have maximum risks of material misstatement related to the accounts payable rights and obligations assertion, they may require two very different audit responses.
Client A's auditor may determine that the best way to lower detection risk would be to compare invoices received from vendors with a listing of approved vendors and purchase orders. Conversely, Client B's auditor may lower the threshold amount in performing a search for unrecorded liabilities. When performing future audit engagements, auditors should be sure to:. Following these tips will help drive high - quality , efficient audits that conform to the standards. For more help, visit aicpa.
To comment on this article or to suggest an idea for another article, contact Ken Tysiac, the JofA' s editorial director, at Kenneth. Published: 20 Aug By CareersinAudit. The current business landscape exists within a tougher regulatory climate which has, since the inception of the EU GDPR , further elevated the threshold for companies to suffer financial losses.
This is where the importance of external audit proves its worth to an organisation. An external audit provides an impartiality that the in-house internal audit team cannot.
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