ACC411 Seminar 1 Auditing Research Paper Auditing Research Paper Auditors, like accountants, prepare and examine financial records to make sure they comply with generally accepted accounting principles and other laws. External auditors review clients’ financial statements for accuracy. Internal auditors check for accuracy and mismanagement of an organizations funds. Auditors can become certified as a CIA, Certified Internal Auditor, after graduating college with a bachelor’s degree and two years experience. There is a four-part test to get this certification.
The Institute of Internal Auditors, ‘IA, also offers other certifications once an auditor meets the requirements. Auditors and accountants have similar education but their Jobs are different. Accountants typically produce the statements that auditors audit. Accountants deal with the day-to-day information of a firm. They pay the bills, review the aging, and prepare a budget. Auditors spend more time going over the procedure or controls used to prepare the reports that accountant’s issue. An auditor can work internally or externally for a company.
Auditors do an examination of the firm’s statements and procedures. An auditor is usually an accountant the works in a different area. There are three main types of audits: operational audit, compliance audit and financial statement audit. An operational audit will evaluate the efficiency of part of a company’s procedure. This type of audit can recommend ways to improve the procedure. The operational audit can also review an entitys structure or operations. A compliance audit will determine wither or not an organization is following government regulations, legal requirements and company policy.
Frequently, this type of auditor will be employed by the company. Financial statement audits are onducted to verify a firms financial statements are correct using generally accepted accounting procedures. A financial auditor will look for misstatements in the reports. There are several types of auditors: CPA firms, government auditor, IRS agent, and internal auditors. CPA firms audit financial statements of publically traded companies. Government accountability audit works for the US government and reports to Congress. Their primary Job is to audit other government agencies.
Everyone is familiar with the IRS auditor and his or her Job of enforcing federal tax laws by auditing taxpayers returns. An Internal auditor is employed by a company to do an audit for management. The AICPA, American Institute of CPAs, was founded to represent CPAs in stand setting. They develop standards for audits and other services provided by CPAs. This national organization of CPAs helps set ethical standards for the accounting profession. It also develops and scores the CPA exam I hope one day to take. The MACPA, Michigan Association of CPAs, is a statewide organization of CPAs.
They are dedicated to promoting and enhancing the profession of certified public accountants. The PCAOB, Public Company Accounting Oversight Board was established due to he Sarbanes-Oxley Act to provide auditing and quality control standards for public company audits. This board is overseen by the SEC. GAAS, or Generally Accepted Auditing Standards, is organized into ten standards. These standards are guidelines and provide structure for the Codification. IAASB is the International Auditing and Assurance Board and they provide the International Standards on Auditing (ISA). ASB is responsible for issuing standards on US auditing.
SOX, Sarbanes-Oxley Act of 2002 was passed by Congress requiring management to certify the accuracy of the financial information they provide. The Act trys to prevent fraudulent accounting practices. An assurance services are provided to enhance the quality of an audit. These services include: an audit of the company’s pension plan, quarterly reviews of the company, or a review of the companys technology system. These are Just a few of the assurance services offered by an auditing firm. Other services include the additional audit of historical data and financial statements.
The state of Michigan Lottery has an audit done with the assurance service ensuring that lottery data was reliable and secure. Ethics is the most important trait an auditor can have. Auditors have to objective when reviewing and gathering information. There has to be an honest attempt to give a fair and reliable opinion in the audit report. They cannot let anything impair their ability to be unbiased. They have to keep all information confidential. Ethical behavior is required of the auditor doing the audit as well as the company they are auditing. If the information provided is not factual, the audit outcome will not be reliable.
If the auditor is not ethical, the opinion they give will be worthless. The unqualified audit report has eight parts: (1) report title has to include the ord independent; (2) audit report address is the address of the company; (3) introductory paragraph stating which financial reports are being audited; (4) management’s responsibility paragraph states that management is responsible for the information contained in the statements; (5) auditor’s responsibility paragraph states that the audit was conducted in accordance with GAAP; (6) opinion paragraph is the auditor’s conclusion; (7) name and address of CPA firm; (8) audit report date.
An unqualified report gives the company a clean bill of health. This is what the company is looking for from the auditor. Sometimes the unqualified report has an ssue and an explanatory paragraph or modified wording is needed to explain. An explanatory paragraph is needed when there is a lack of consistent use of GAAP or there is doubt that the firm will be able to continue operating past one year. A qualified opinion is used when the overall financial statements are fairly stated but certain conditions are not met.
Either there is not enough information for the auditor to form an opinion, the financial statements are not prepared using GAAP or the auditor is not independent. If the information on the financial statements is materially misstated, the opinion is adverse. When the auditor cannot satisfactorily state the financial statements are fairly represented he or she might issue a disclaimer of opinion. Due to the increase in corporate scandals, we may see an increase in audits. force.
The financial crisis that occurred a few years ago may cause companies to do an audit to ensure that they are stable and able to survive. Audits in the future can focus on the implementation of new and more secure technology. As the internet grows and companies utilize it more, there will be a need to regularly audit the IT system. I think the future of internal audits will increase over time. References Arens, A. & Elder, R. & Beasley, M. (2014), Auditing & Assurance Services, An Integrated Approach, Boston, Pearson.
Executive Digest. Bureau of State Lottery. Retrieved from: http:// audgen. michigan. gov/finalpdfs/rsap/98_99/rs2741097. pdf. United States Department of Labor. Occupational Outlook Handbook. Retrieved from: www. bls. gov/ooh/Business-and-Financial/Accountants-and-Auditors. com. The Institute of Internal Auditors. Certification. Retrieved from: www. theiia. org American Institute of CPAs. Retrieved from: wrww. aicpa. org Financial Accounting Standards Board. FASB. Retrieved from www. fasb. org