External auditors role
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External auditors are independent third-party professionals who review the accuracy and reliability of an organization's financial records, internal controls, and compliance with relevant laws and regulations. They provide assurance to the organization's stakeholders that the financial statements are fairly presented, in accordance with the applicable financial reporting framework. External auditors also provide advice and guidance to management on how to improve their operations and ensure they are operating in an efficient and effective manner.
Example of external auditors role
- External auditors are responsible for verifying the accuracy of financial records, evaluating the effectiveness of internal controls, and assessing the organization’s compliance with all applicable laws and regulations. They conduct audits to ensure that financial statements are presented fairly, in accordance with the applicable financial reporting framework. They also provide advice and guidance to management on how to improve their operations and ensure they are operating in an efficient and effective manner.
- External auditors may review the accuracy of an organization’s accounting records, such as income statements, balance sheets, and cash flow statements, to ensure that they are presented in accordance with the applicable financial reporting framework. They may also assess the effectiveness of the organization’s internal controls, such as segregation of duties and access control, to ensure that there are adequate safeguards in place. In addition, the external auditors will assess the organization’s compliance with laws and regulations, such as the Sarbanes-Oxley Act, to ensure that the organization is operating within the scope of the applicable laws.
- External auditors also provide advice and guidance to management on how to improve their operations and ensure they are operating in an efficient and effective manner. For example, the external auditors may recommend changes to the organization’s internal control structure to enhance its effectiveness, or suggest ways to improve the organization’s compliance with laws and regulations. They may also provide advice on how the organization can improve its financial reporting process to ensure that financial statements are presented in accordance with the applicable financial reporting framework.
Types of external auditors role
External auditors provide a wide range of services to organizations. The following are some of the roles external auditors typically perform:
- Financial Statement Audits: External auditors review and evaluate an organization's financial data to ensure accuracy and compliance with applicable laws and regulations. They also provide assurance that the financial statements are fairly presented in accordance with the applicable financial reporting framework.
- Operational Audits: External auditors evaluate an organization's internal controls and processes, identify areas of risk and weakness, and recommend improvements.
- Compliance Audits: External auditors review an organization's compliance with applicable laws and regulations, including tax laws, anti-corruption laws, and environmental laws.
- Fraud Audits: External auditors investigate potential instances of fraud and embezzlement and provide assurance that the organization's internal controls are adequate to detect and prevent fraud.
- Risk Management Audits: External auditors review an organization's risk management policies and procedures to ensure they are effective in identifying and managing risks.
- Merger and Acquisition Audits: External auditors review the financial information of companies involved in a potential merger or acquisition to ensure the accuracy and reliability of the data.
- Contract Audits: External auditors review contracts to ensure compliance with the terms of the agreement and identify potential areas of financial risk.
Suggested literature
- Fan, J. P., & Wong, T. J. (2005). Do external auditors perform a corporate governance role in emerging markets? Evidence from East Asia. Journal of accounting research, 43(1), 35-72.
- Kassem, R., & Higson, A. W. (2016). External auditors and corporate corruption: implications for external audit regulators. Current Issues in Auditing, 10(1), P1-P10.
