Auditing Profession - Example

Only available on StudyMode
  • Download(s) : 546
  • Published : June 29, 2011
Open Document
Text Preview
Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria (Arens, Elder, & Beasley, 2010). Auditing should be done by a competent, independent person. Accounting is the recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making (Arens, Elder, & Beasley, 2010). Many people confuse auditing with accounting because auditing is usually concerned with accounting information, and many auditors have a considerable amount of experience in the accounting profession. This confusion results from the certified public accountant title given to individuals who perform audits (Arens, Elder, & Beasley, 2010). Auditors must understand the accounting data to accumulate and interpret audit evidence Certified public accountants perform three primary types of audits; operational, compliance, and financial statement audits (Arens, Elder, & Beasley, 2010). Operational audit evaluate the efficiency and effectiveness of any part of an organization’s operating procedures and methods. At the completion of an operational audit, management notmally expects recommendations for improving operations (Arens, Elder, & Beasley, 2010). An example of an operational audit is evaluating whether the computerized payroll processing for a subsidiary is operating efficiently and effectively. Compliance audit is conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority (Arens, Elder, & Beasley, 2010). They determine whether accounting personnel are following the procedures prescribed by the company controller, review wage rates for compliance with minimum wage laws, and examine contractual agreements with bankers and other lenders to be sure the company is complying with legal requirements (Arens, Elder, & Beasley, 2010). An example of a compliance audit is determining whether bank requirements for loan continuation have been met. A financial statement audit is conducted to determine whether the financial statements are stated in accordance with specified criteria (Arens, Elder, & Beasley, 2010). An example of this is evaluating a business’ financial statements. There are several types of auditors in practice; the most common types are certified public accounting firms, government accountability office auditors, internal revenue agents, and internal auditors (Arens, Elder, & Beasley, 2010). Certified public accounting firms are responsible for auditing the published historical financial statements of all publicly trading companies, most other reasonably large companies and any smaller companies and noncommercial organizations (Arens, Elder, & Beasley, 2010). The certified public accountant (CPA) title expresses the fact the auditors who express audit opinions on financial statements must be licensed as CPA’s. A government accountability office auditor is an auditor working for the U.S. Government Accountability Office (GAO), a nonpartisan agency in the legislative branch of the federal government (Arens, Elder, & Beasley, 2010). Their primary responsibility is to perform the audit function for Congress, and it has many of the same audit responsibilities as a CPA firm. There is a growing portion of the GAO’s audit efforts devoted to evaluating the operational efficiency and effectiveness of various federal programs (Arens, Elder, & Beasley, 2010). GAO auditors are highly regarded in the auditing profession. Internal revenue agents are responsible for enforcing the federal tax laws as they have been defined by Congress and interpreted by the courts (Arens, Elder, & Beasley, 2010). A major responsibility of the IRS is to audit taxpayer’s returns to determine whether they have complied with the tax laws. Internal auditors are employed by companies to audit for management, much as the GAO does...
tracking img