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The Importance Of Audit Has Increased Considerably In The Last Couple Of Decades Due To Globalization, Multiple Financial Meltdowns, Complex Business Models And Constant Effort To Standardize Compliance Levels In Business By International Organizations.
The Audit Is A Thorough Examination Of Any Business's Policies And Procedures Related To Financial Reporting. The Qualified Person To Conduct An Audit Is Known As An Auditor. Various Laws And Regulations Like The Companies Act Of 1956, 2013 And The Companies (Amendment) Act Of 2020 Are Rolled Out From Time To Time To Ensure The Business Operators Are Ethically, And It Benefits The Society And Economy As A Whole.
In Essence, The Role Of An Auditor Is To Act As A Whistle-blower. He Has To Ascertain And Inform The Company's Financial Position Of The Business At The Time Of Audit To The Management. He Can Make Recommendations On The Gaps And Possible Solutions But Is Not Obligated To Fix Them.
There Are Two Types Of Auditors, Internal And External. The Nature Of Work Remains Identical, But The Scope Of Their Responsibilities Differs Quite A Lot. Any Qualified Accounting Practitioner Can Be Hired As An Auditor Of The Company Or Institution. Some Renowned Accounting Firms Globally Engaged As External Auditors Are KPMG, Deloitte, PwC, Ernst And Young, BDO LLP Etc.
The List Of Rights And Responsibilities Of An Auditor Can Be Pretty Extensive. However, An Independent Auditor's Fundamental Rights And Duties Are Listed Below.
A] Rights Conferred Upon The Auditor Include
- Right To Access Books Of Accounts to Begin The Analysis Of The Company's Financial Standing. It Includes Balance Sheets, Profit And Loss Accounts, Cash Flow Statements And Other Reports.
- Right To Obtain Information And Explanation from The Directors And Other Staff Members Regarding Missing Entries, Undisclosed Transactions And Suspense Accounts To Get A Complete Understanding Of The Financial Operations.
- Right To Visit Branches of A Business Entity To Scrutinize Branch Accounts Where The Auditor Suspects To Be In Breach Of Regulations And Take Action Accordingly.
- Right To Receive Notices Related To The Company's General Meetings which Can Allow Him To Get More Information And Raise Any Concerns Over The Company's Accounting Practices And Or Books Of Accounts. Also, He Is Not Obligated To Attend All Meetings, But It Helps To Draft An Audit Report Diligently.
- Right To Take Legal And Technical Advice where The Information Is Full Of Jargon And Ambiguous. This Helps The Auditor To Prepare An Accurate And Fair Report.
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B] Core Duties Of An Auditor Are
- Provide An Audit Report which Is Duly Prepared After A Thorough Scrutiny Of The Company's Financial And Accounting Documents. It Should Provide A Detailed Summary Of The Papers Reviewed, Exceptions, And Suggestions Made To Better The Company's Financial Condition.
- Make A Proper Enquiry about Any Dealings Of The Company Like The Issue Of Credit, Raising Of Debt, Purchase Of Assets, Debt Liability, Investor Declarations Etc. His Job Does Not Allow For Any Assumptions; Instead, He Must Base His Judgement On Facts Included In The Report Without Being Fabricated.
- Comply With Industry Standards like Adherence To Generally Accepted Accounting Principles (GAAP) And Rules Laid By National Financial Reporting Authority (NFRA) While Conducting Audits And Any Related Proceedings.
- Report Frauds And Assist In Investigations conducted Based On Your Audit Report. An Auditor Is Obligated To Report Any Fraudulent Activity Within The Company To The Government Authorities. Furthermore, Please Share Details With The Investigation Team To Enable Them In Finding And Prosecuting The Guilty.
- Provide A Fair Opinion about The Company's Operations. He Is Not Supposed To Hold Back And Furnish Any Misleading Information In His Report. Doing So Is A Punishable Offence.
These Are Some Of An Auditor's Most Fundamental Rights And Responsibilities, Which Apply To All Types Of Auditing Roles And Industries. It Takes A Good Amount Of Accounting Knowledge And Experience To Perform Audits For Businesses Of All Sizes. Every Company Has Its Way Of Conducting Operations. But If It Is Not In Line With The Rules Set By The Regulatory Bodies, They Should Be Brought To Light And Penalized, Be It A Matter Of Tax Evasion Or A Big Fraud.
There Is Only One Rule That A Good Auditor Follows: "Never Believe Your Eyes Or Ears Unless Proven By Facts" His Job Is To Go Behind The Numbers And Not Only By The Numbers.
