Professional Documents
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Supervise Management
RESPONSIBILITIES
INTERNAL AUDITOR EXTERNAL AUDITOR MANAGEMENT The to form an The auditors main responsibility isinternal auditors are either: give a true & fair view of the companys results opinionperiod underthe companys financial statementsthe year end. fair view. for the on whether review and its financial position at give a true & Employees of the organisation they are auditing or Effects of significant accounting policies. Contracted to provide internal audit services through an outsourcing arrangement. Potenial financial effect of risks/uncertainties. ISA 610 considering the work of internal audit gives the main activities of the internal audit functio Material audit adjustments. Monitoring of internal control. ofInternal control weaknesses including fraud. financial statements and to prevent and detect fraud or error. Examination of financial & operating information. Disagreements with management concerning the financial statements. Review of the economy, reporting responsibilities, e.g. In some jurisdictions the external auditors have further effieciency & effectiveness of operations including non-financial controls Review UK report on with laws, regulations & other external requirements & management policie The auditors of listed companies in theof compliancecertain aspects of the dislosures of directors remuneration. Special invesigations into particular areas, for example, suspected fraud. Auditors in the Republic of Ireland report on certain aspects of the adequacy of a companys capital.
RESPONSIBILITIES
pre Internal controls/Prevent & Detect Fraud/Error eparation of Financial statements sdjb
Management Implement
Prevent
Detect Aud
itor
Sampling Risk
Non-sampling Risk
Auditor is not
ISA 240 The Auditors responsibility to consider Fraud in an Audit of Financial Statements gives the defination
of:
Fraud an intentional act involving the use of deception to obtain an unjust or illegal advantage. Error an unintentional mistake and could include accidental misapplication of accounting policies,oversights or
misinterpretation of the facts. Fraud can be further split in to two types: Fraudulent financial reporting deliberately misstating the accounts to make the company look better/worse than it actually is Misappropriation of assets - the theft of the companys assets such as cash or inventory.
SAMPLING RISK:E.g:-
(Error)
3
(verified)
5
(Fraud)
(Fraud)
Even if the fraud is present in the transaction, you audited & you do this unintentionally. This is known as Non-Sampling Risk. You can reduce the non-sampling risk by using professionalism or by using experienced auditors.
Vocabulary:Adequacy (satisfactorily or acceptable), ad hoc ( created or done for particular purpose), Precise (expressed very clearly), deception (the action of deceiving), scepticism (the questioning mind of the auditor), trivial (of little value or importance).