The meaning of auditor?
Posted by Kingsley on Tuesday, September 15, 2009
What exactly is an auditor? I have heard many companies when asked for the Financial Statements or accounts say “Speak to the auditors?” and when asking numerous businesses their response is that an auditor is some-one independent or separate from the day to day running of the business. In part this is true but this is not the definition of an auditor and many people seem to be in confusion as to the exact role of an auditor and what an audit entails. Some-times the auditor is mixed up with an accountant and this does get mighty confusing.
Now the word “audit” actually originates from the Latin “to hear”, and this is precisely what an audit should be about, to hear or observe what is happening within an organisation through discussion with stakeholders, observation and scrutiny and documents.
According to the Auditing Professions Act (Act 26 of 2005) audit “means the examination of, in accordance with prescribed or applicable auditing standards:
1) Financial statements with the objective of expressing an opinion as to the fairness or compliance with an identified reporting financial framework and any applicable statutory requirements: or
2) Financial and other information prepared in accordance with suitable criteria, with an objective of expressing an opinion on the financial and other information. “
The simple Latin definition of “audit” does seem easier to digest and does personify the essence of an audit. The above definition does limit audits to primarily financial information as pertains to the audit of an organisation’s financial statements when in fact audits include all reviews of not only financial accounts but of the systems, compliance to procedures and risk reviews. It is at this stage that the wording needs to be expanded into External Audit vs Internal Audit.
An external audit is performed by a registered auditor (RA), registered with the Independent Regulatory Board of Auditors (IRBA). Only a registered audit can sign off the audit opinion on the financial statements. Fortunately with the new Companies Act many organisations have been de-regulated and only regulated industries and Public Companies or Private Companies with a public interest are required to be audited. This means that all smaller Private Companies (shareholders are involved in the business) only require a review of the financial statements and this review can be performed by an accounting officer.
An internal audit includes any review by a qualified internal auditor of an organisation’s controls and systems to ensure compliance with procedures and standards and to identify any risks or areas where controls can be improved. The internal auditor invariably assists the external auditor when stating their audit opinion in the financial statements.
In summary an auditor is anyone who performs an independent review of an organisation for purposes of submitting a report including an opinion based on the objective and scope of the review and findings and recommendations relating to the issues identified.
KBAudit 031 7652875
Now the word “audit” actually originates from the Latin “to hear”, and this is precisely what an audit should be about, to hear or observe what is happening within an organisation through discussion with stakeholders, observation and scrutiny and documents.
According to the Auditing Professions Act (Act 26 of 2005) audit “means the examination of, in accordance with prescribed or applicable auditing standards:
1) Financial statements with the objective of expressing an opinion as to the fairness or compliance with an identified reporting financial framework and any applicable statutory requirements: or
2) Financial and other information prepared in accordance with suitable criteria, with an objective of expressing an opinion on the financial and other information. “
The simple Latin definition of “audit” does seem easier to digest and does personify the essence of an audit. The above definition does limit audits to primarily financial information as pertains to the audit of an organisation’s financial statements when in fact audits include all reviews of not only financial accounts but of the systems, compliance to procedures and risk reviews. It is at this stage that the wording needs to be expanded into External Audit vs Internal Audit.
An external audit is performed by a registered auditor (RA), registered with the Independent Regulatory Board of Auditors (IRBA). Only a registered audit can sign off the audit opinion on the financial statements. Fortunately with the new Companies Act many organisations have been de-regulated and only regulated industries and Public Companies or Private Companies with a public interest are required to be audited. This means that all smaller Private Companies (shareholders are involved in the business) only require a review of the financial statements and this review can be performed by an accounting officer.
An internal audit includes any review by a qualified internal auditor of an organisation’s controls and systems to ensure compliance with procedures and standards and to identify any risks or areas where controls can be improved. The internal auditor invariably assists the external auditor when stating their audit opinion in the financial statements.
In summary an auditor is anyone who performs an independent review of an organisation for purposes of submitting a report including an opinion based on the objective and scope of the review and findings and recommendations relating to the issues identified.
KBAudit 031 7652875
