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Role of Auditors and the Auditor’s Report Essay Sample

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Role of Auditors and the Auditor’s Report Essay Sample

The external auditor is the person appointed by the local government under the Local Government Act 1995 to undertake an audit of the accounts and financial report for each financial year. The internal auditor is the person appointed by the local government to undertake an audit of the adequacy and effectiveness of the internal control structure and may include financial controls, legislative compliance, information systems, employment practices and risk management. The primary role of the internal auditor is to report to the Chief Executive Officer (CEO) on the adequacy and effectiveness of internal control processes and procedures. The scope of an internal audit would be determined by the CEO, with input from the audit committee, on the size of the local government’s internal operations and the level of compliance to be achieved. The role differs from that of the external auditor who is appointed by council on the recommendation of the Audit Committee, to report independently to it, through the mayor/president and the CEO, on the annual financial statements.

The external auditor’s primary role is to decide whether the annual financial statements of a local government are free of material misstatement. The audit report is addressed to the shareholders of the company being audited, this means the shareholders are acknowledged as the main recipients of the financial report and the attached audit report. Shareholders rely on the information provide by the management of their company in the financial report. The board of directors represents the shareholders and oversees the activities of a company and its management, it is the role of the board to ensure that the company is being run to benefit the shareholders. It is the director’s responsibility to ensure that the financial report is prepared so as to provided a true and fair view. The directors indicate to the shareholders whether they believe that the financial report and accompany notes comply with Australian Accounting Standards and the CORORATION ACT, and are true and fair.

Establishing a professional working relationship between internal audit and the external auditor should deliver benefits to both parties. It is important that internal audit seek input from the external auditor in developing the internal audit strategy and internal audit work plan. Internal and external audit consult with each other during the planning phase of individual audits that address the key financial and business systems underpinning the entity’s financial statements. In order for the external auditor to use specific work of the internal auditor, the external auditor is required to evaluate the work of internal audit to determine its adequacy for external audit purposes. Internal audit may have a role in assisting the Audit Committee to assess the service provided by external audit (ANAO, Better Practice Guide-Public Sector Audit Committees, August 2011, p. 37.) In the case of Theobald Ltd, the internal audit department did not provided a true and fair financial report to the shareholders, as the financial report provided by internal audit department is highly regarded within the board of directors, and the board made many change是 regarding to the financial report.

As the role of the external auditors mentioned above, external auditors can not rely on the work of the internal audit department The planning phase normally consists of three distinct, but often overlapping, activities, i.e. gaining an understanding of the nature of the program, activity, organization or initiative being audited, determining and assessing risks, and determining the most appropriate audit objectives, scope and criteria to be employed.

The audit manager needs to develop a sound understanding of the program, activity, organization or initiative being audited, including its management practices, business processes, policies and procedures, and external and internal environments. Specifically, to be compliant with the TB Policy on Internal Audit, the audit manager needs to be focused on all important aspects of risk management, control, and governance processes for the program, activity, organization or initiative being audited. As the reports provided by the audit department can not give the shareholders and third parties a true and fair view of the running of Theobald Ltd. This may impact on the audit plan for the company, such as the the auditors can not gain an understanding of the nature of the program, activity, organization or initiative being audited, Also they can not determining and assessing risks, Or to determining the most appropriate audit objectives.

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