First of all, to understand the meaning of an audit and what auditors do in the public trade company, the best way to understand it is to know the definition of an auditing term. The financial auditing is the process of checking the accuracy of financial reporting. There are three forms of engagements: examination, review, and agreed-upon procedures engagement. First, the examination is the action that will involve all the past information of financial statements to attest all available evidence limiting attestation risk to a minimum level.
The CPA will provide reasonable assurance that the subject matter is accurate. Second, a review is lesser than an examination which only a moderate level of assurance. Third, an agreed-upon procedures engagement is a summary of those procedures and their findings.
The public trade company is the company that issued a tradeable financial asset (securities) and is traded on over one stock exchange. Public companies must adhere to all the rules and disclosure important financial statement information which are required by the U.
S Securities and Exchange Commission (SEC). The public companies must be audited by independent auditors to provide reasonable assurance. The registration statement must meet the standard of disclosure and free from material errors. The main reasons for the audit have protected the investors and the public from fraud and untruthful financial reporting. In fact, by providing all the important financial information, the investor can make a decision whether to invest the given security.
If the SEC discovers the given registration does not qualify its standard requirements, it may request an amendment of statement or may prohibit the sale of securities.
Being a good auditor seems easy but actually not. First, a good auditor needs to have to required experience and a basic knowledge of the audit criterion. A good auditor does not need to know everything and be independent. On the other hand, the best way for an auditor to learn something is by asking questions at right time about product liability. However, a good auditor needs to balance on subsidiary with other knowledge. Furthermore, a good audit should be a good listener and has effective communication skill so he/she can influent people at all level of organization. The best tip is shown no emotions and does not be arrogant. For example, a good auditor will not try to impress that he/she is special than others or talking too much about his/her abilities. What is considered a good audit? A good audit report should be based on factual information; moreover, it should be clear and concise. A good audit report will not repeat information and control the length of the audit report. Furthermore, an audit report must follow the rule and consistent with accounting information according to GAAP and IFRS. Auditing standard requires documentation of fairness and unbiasedness about the facts and must disclose all the standard of financial statements information.
An audit failure meant that the company’s financial statements are inaccurately identified or the material misstatements whether due to lack of relevant document during the audit. In fact, audit failure will endanger to national economy and harm to existence profession in the long run. So what really is an audit failure? The term of audit failure occurs when there is a serious distortion of financial statements are undetected and grossly misstated. A company with poor management priorities will have a negative effect on how people implementing and working on the control. The untrained individuals will lead to business risk and information risk. Therefore, companies should provide securities awareness training with the employees. An audit failure can be prevented if the auditor has interpreted and followed the GAAP. Moreover, the auditor is detected any possible misleading errors and misstatements of the company to the public perception. The auditor’s duties are going concern about a major component of existing financial statement and what auditors want to deliver in the report. An audit failure can increases if the auditor does not adhere and follow the principle of the ISA.
The first audit report usually performs by the internal audit group or employees within the department of the company. For instance, employees who work in the same department may also conduct self-assessment similar to the first party audit. The reason for self-assessment to supervise and analyze quality assurance program and overall system integrity. The second party audit usually performs by a customer to verify that whether or not the suppliers can satisfy proposed contractual requirements. The customer often contracts with independent qualify auditor to report the fairness of financial statement presentation. Having a high-quality auditor working on the company’s behalf can help to prevent fraud, abuse, and non-compliance with government regulations.
The third-party audit occurs when a company has decided that they want to apply international quality standard or creating a quality management system (QMS), such as ISO 9001. The company will hire an independent company to perform an audit examination to verify that the company satisfies all the requirement of the chosen standard. After that, the independent company will provide certification to attest the company meets all requirements of chosen standard. There are three types of audit used in this process: certification audit, maintenance or surveillance audit. 6. Conclusion An audit is the best choice for a future career if someone wants to work with different companies, industry, and does not afraid of discussion with other team members. The audit job requires more attention in details and meticulous work. The career in accounting, especially in audit, offers valuable qualification and excellent job security.