What Is the Need for an External Audit

Having internal controls is one thing, but how the company evaluates that control is a matter all by itself. Being an independent auditor, it is our job to understand an entity and

Even though The Schwan Food Company is a private company, since the company’s goal was to double its size in five years, establishing an internal audit function could provide assurance and consulting services to help the company achieve its objectives and expand globally. The four factors that may have caused The Schwan Food Company to change its internal control practices and corporate governance structure are,

When auditing a public company, the auditor must form an opinion on the effectiveness of internal control

the auditors of publicly traded companies and to ensure that corporate financial statements are subject

Not only the managements are responsible for a company’s accounting information, but also the board of directors and audit committee are more accountable. According to Turner and

An annual audit is mandatory for public companies and may be necessary for some private companies and charitable organizations. Any company that issues securities such as stocks and bonds that can be bought and sold by the public on a stock exchange or an over-the-counter market is required by law to provide annual financial statements that have been audited by an external party. Even though private companies by law are not required to have an external audit some may choose to institute a yearly external audit to have the assurance that the financial statements are being fairly presented and with no material misstatements. It is different from state to state, charitable organizations may be required to have an external audit if they meet the state law requirement. And if during the year the organization receives more than $500,000 in federal funds the organization is also obligated to have an audit because it meets the federal audit requirements. A charitable organization may also be obligated to have a yearly audit if their donors require it in order to have the security that the donations made by them will be put to use for the intended purposes. Required or not audits can provide many

There are many rules and guidelines that concern how companies and licensed representatives conduct daily business/financial transactions. However, it has been noted that XYZ’s stop gap measures are not in direct correlation with the Securities Exchange Commission’s guidelines. Therefore, research is needed in order to understand what XYZ is lacking in terms of compliance standards. The proposal consists of researching what is needed to ensure that all licensed representatives are complying with the reporting requirements of the SEC. It is understood that it is mandatory for XYZ to maintain all licensed representatives personal financial documentation to show trading compliance. Right now, XYZ employees are required to self-disclose banking information. However, it has been discovered that many licensed representatives are not disclosing all pertinent banking information. Because of the non-disclosure issues, the SEC has discovered unfair trading practices that involve XYZ employees. Examples of what will be involved in the research project is to delve into the unfair/unethical practices that involve allegations of insider trading, tied selling and principal-agent problems.

The external audit focuses on identifying and evaluating trends and events beyond the control of a single firm. An external audit reveals essential opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats.

The company should hire it’s own internal auditor’s to ensure that the staff understand the company’s accounting procedures. This also helps the external auditor as it give the external auditor another viewpoint when assessing fraud risks. The internal auditors are apart of those charged with governance and that helps take the pressure off of the external auditor if a fraud should be discovered.

Shareholders of the company have ultimate control of the company. They can appoint and remove directors who run the business and are also responsible for its management of the company.

An audit is based when management prepares the financial statements, maintain internal control over financial reporting, and provide relevant information and access to the auditor.

1a). A company would want to hire a member of its external audit for a number of reasons. The external auditor would have extensive knowledge of how the company works due to analyzing statements and performing many audit procedures and tests on the company and therefore would reduce time in order to become effective as an employee. The company would know the former auditor personally and have a good idea of how they would fit in with the existing staff. The former auditor could prepare working papers and assist with the auditors to reduce the time and cost of the audit. However, the former external auditor would know what the existing

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.

Internal auditors cannot effectively provide an analysis on the company’s internal dealings as they are part of the company. External auditors, however, can observe these processes from the outside and then determine where the funds of the company and whether the dealings adhere to the regulations. Using external auditors in a company prevents conflict of interest from happening. Conflict of interest is a situation where an individual or organization has multiple interests and of those multiple interests, one could possible corrupt the motivation for an act on the other when the auditor has any kind of beneficial interest in their client’s performance. In other circumstances, there is also the threat of familiarity where auditors become

The aim of this essay is to study the function of external auditors in order to analyze why it is important to be independent. The primary mission of external auditors is to review and evaluate all the financial records of a company or corporation. They provide an objective opinion on the organization’s financial statement and effectiveness of the accounting polices in order to help management to make decisions. If the independence of the external auditors is impaired, the public will doubt the quality of professional auditing services, and the consequence would be very serious, just like the bankruptcy of Enron led to the disorganization of Arthur Andersen, once a giant accounting company in the world. In order to maintain and increase