External Audit, Internal Audit, Forensic Audit
Audit & Assurance
Audit & Assurance is a highly complex process, and the importance of auditors as a vital link in the financial reporting chain has never been more important nor their role as trusted advisors more valued. The Middle East network of Audit & Assurance professionals at Deloitte member firms provide a range of Audit & Assurance and advisory services to assist clients in achieving their business objectives, managing their risk and improving their business performance—anywhere in the world.
1. Internal Audit
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
Performed by professionals with an in-depth understanding of the business culture, systems, and processes, the internal audit activity provides assurance that internal controls in place are adequate to mitigate the risks, governance processes are effective and efficient, and organizational goals and objectives are met.
Evaluating emerging technologies. Analyzing opportunities. Examining global issues. Assessing risks, controls, ethics, quality, economy, and efficiency. Assuring that controls in place are adequate to mitigate the risks. Communicating information and opinions with clarity and accuracy. Such diversity gives internal auditors a broad perspective on the organization. And that, in turn, makes internal auditors a valuable resource to executive management and boards of directors in accomplishing overall goals and objectives, as well as in strengthening internal controls and organizational governance.
Seems like a lot to ask from one resource? Maybe for some, but for internal auditors — it’s all in a day’s work.
Definition of Internal Auditing
According to the Definition of Internal Auditing in The IIA's International Professional Practices Framework (IPPF), internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
2. External Audit
Once the external audit has been completed, the auditors should provide a report that sets out the official “audit opinion”. This will establish whether the financial statements prepared give a true and fair picture of the operations and financial affairs of the businesses during the auditing period. If this is the case, then the report will state the fact, with “true” referring to the fact that all transactions listed occurred and all assets referred to exist, and “fair” confirming that assets and liabilities are fairly listed and that the value assigned to any transaction is fair.
Advantages of an External Audit
An external audit is usually conducted by a third person and thus is much unbiased. A company can avail of many benefits while conducting an external audit. Some of these benefits are:
An external audit provides an overview of the business process and establishes that the information in the books of accounts is correct and accurate. The auditor presents an audit report which will simplify and present all the workings of the company which would help the management to take remedial actions regarding any slow or faulty process. Furthermore, the report would help in providing a complete understanding of the workings of the various departments of the business.
Furthermore, an external audit provides business owners with the opportunity to work closely with external auditors to look at their accounting process with a critical eye and work on making improvements.
An auditor sees to it that the books of accounts are made according to the rules and regulations of the concerned authority. Since a financial audit is conducted at regular intervals, it helps in keeping the accounts department at par with the stated rules and regulations. The external auditor will also make sure that the accountants of the company are updated with any new regulation of the government or the authority concerned.
As the external auditor is a separate third party and has no relations to the company whatsoever, he would be unbiased towards the company and would present his reports and the corresponding views in such a manner. The purpose of the auditor is to minimize the wastage in business and increase its profitability.
As the audit will streamline all the process, there would be fewer chances of wastage of both time and resources. With a detailed report, management can adequately focus and uplift the department where most of the work needs to be done. This would help the profitability as the business would have access to a more significant number of employees and resources and would also tackle the problem of disguised unemployment in the company.
As the audit report will provide a detailed and accurate description of all the past and present works of the company, an investor can make a better decision regarding investment in the company. The investor would scrutinize the audit report, and if after that he feels that the company is on the path of profitability and investing in the company would be the right decision then he can invest in the business. Thus, it would simplify the decision-making process of a potential investor.