They conduct reviews of financial statements and records to confirm publicly held companies meet their legal requirements under U. Companies that are not publicly traded hire auditors to verify that internal accounting procedures and financial operations run efficiently, and that standardized accounting practices are maintained. Accurate Financial Statements Publicly traded companies are required by the U. Securities and Exchange Commission to have financial records audited regularly by an independent outside accounting and auditing firm.
Team YS Auditing encompasses a host of activities which primarily include investigation process, attestation process and reporting process pertaining to economic actions. In the light of recent Satyam fraud issues pertaining to the role of Auditors have been raised by different quarters.
Is it possible that the auditors of Satyam could have been unaware of what was happening in the company? At all times, auditor has to act with care and skill of a professional of reasonable competence.
He has to take into account any deficiencies he may note therein.
The Auditor does not conduct the audit with the objective Role of auditors discovering all frauds because in the first place, it would not be possible to complete the audit within the time limit prescribed by the law for the presentation of accounts to the shareholders. Further, the cost of doing this would be prohibitive and disproportionate to the benefits which may be derived by the shareholders An auditor is not concerned with the policy of the company.
It is not his prerogative to see whether the business of a company is being conducted prudently or imprudently, profitably or unprofitably. His business is to ascertain and state the true financial position of the company at the time of the audit.
The auditor has a fiduciary relationship with the shareholders of a company. Therefore, he has a moral obligation to see that ensuring that the statements issued are made with the utmost skill safeguards their interests and care and depict the true and fair state of affairs of the company.
Section of the Companies Act imposes a penalty for on the auditors if there is willful negligence and default. In order to hold the auditor liable for fraud, the following conditions must be satisfied: The Companies Act, imposes a Criminal liability on any person who makes a false or untrue statement through any document like balance sheet, profit and loss account, return, prospectus, intentionally, thereby causing a loss to the people who rely on such documents.
Therefore, the auditors should employ utmost good faith, care and vigilance in the carrying out of their duties. If there is the slightest bit of suspicion of the legality and integrity of a record or transaction, the auditor is under a duty to investigate and report it, before he certifies it to be true.
Now let us come into the issue pertaining to Satyam fiasco. But a pertinent question is, how can there be fictitious cash and bank balances of more than Rs 5, crore without the knowledge of the auditors? Auditors are supposed to independently confirm this with the bankers.
For IT companies, revenue comes from contracts in stages over a period of time. There are certain methods of revenue recognition.
Client status and billing status details were available. An auditor needs to know how to go about scrutinizing orders and contracts and agreements to figure out how much of revenue will come from a project in that financial year. When Satyam is equipped with sophisticated ERP system, connecting all its processes and systems, it is all the more difficult to accept that that none of the auditors, directors and management had knowledge of the alleged scam.
The auditors should perform their duties with utmost care and vigilance to ensure that there are no illegal or improper transactions. But the recent mishap at Satyam clearly indicates the loopholes in the system. The mandatory appointment of dual Auditors system as envisaged by ICAI is a right step towards right direction as it would induce more check and balance in the system.
Moreover, appointment and remuneration of auditors should not be left to the companies they audit, as the fees can easily influence the auditors report. A better option would be to pool in money and hand it over to the stock exchanges that can appoint auditors.
Forensic auditors should be used to unearth evidence of wrongdoing. For this purpose a pool of professionals may be drawn from the police or the CBI, lawyers and audit professionals with an objective approach.Professional Training Sheq Implementation & Auditors Course (Health, Safety, Environmental & Quality Management) Key Objectives: The objective of this course is to meet the required Implementation and Lead Auditor Training for.
The role of the external auditors is reducing the agency problem. The auditors are playing role as watchdogs to help the shareholder monitor the credibility of the information presented by the management and verification of finance statement is showing true and fair view to the shareholder.
External auditors play a critical role in validating your company's finances. Potential lenders and investors often require externally audited financial statements before extending credit or providing funds for your business.
An internal audit is designed to look at the key risks facing the business and how the business is managing those risks effectively. It usually results in recommendations for improvement across departments.
PepsiCo uses an annual survey of about senior executives to demonstrate the condition of its control culture. Conducted by the company’s internal auditors, the questionnaire probes hiring.
The function of the IRBA is to help create an ethical, value-driven financial sector that encourages investment, creates confidence in the financial markets and promotes sound practices.