What is the Role of an Auditor in an Organization

What is Role of an Auditor? As we know that Auditing standards are quality of work that can be used to measure the performance of auditors.

The audit staff can follow the stated principles and practice in the conduct of an audit. Let’s discuss in detail important role of auditing.

Role of an Auditor in an Organization

The important role of auditing in an organization is as under:

1. Audit Of Accounts

The auditor plays a role in the audit of accounts. It is a search of work done by the management. The audit is an accountability of managers.

See Also: How to Conduct an Audit of a Firm

The auditor can protect the rights of shareholders who are away from the business. The audit report can show the progress.

2. Tax Cases

The auditors play their role in settlement of tax cases. The tax department can accept the accounts audited by a qualified auditor. The business management can present the audited accounts to settle the tax cases.

3. Accounting

The auditors play their role the in development and implementation of an accounting system. The books, registers, devices, machines and other matters can be decided for an effective accounting system. The business entity can apply such accounting system.

4. Electronic Data Processing

The auditors play their role in electronic data processing. It relates to the accumulation, classification, analysis and summary reporting of large quantities of information.

The auditor can develop a system for recording and processing information by means of computer.

5. Information and Control

The auditors can play their role in decision-making. It is a difficult task in case of multi-product lines and large network of branches.

The auditor can prepare information for various management levels in order to control the business effectively.

The transactions, control accounts, control ratios and statistical sampling system may be developed.

6. System Advice

The business work is divided among departments. The departmental managers can set up a procedure for proper working.

See Also: Purpose of Audit Program

There is a need to connect the work of all departments. The auditor can give useful advice.

7. Balancing Books

The auditors can perform the work of balancing books. The accounting staffs prepare the books.

The closing work is left open for the qualified persons. The auditor can take out balances of various accounts for preparing trial balance and final accounts.

8. Writing Up Books

A qualified auditor can be asked to write up books of the business. He may act as accountant as well as auditor.

As an independent person he has the right to accept this service in case of small or medium scale business. The prescribed books are used in preparing accounts.

9. Help to Secretary

A company secretary can get help from the auditor. The secretarial work requires legal formalities. An auditor is expert is accounting and other laws affecting the business.

He can provide the guidance to the secretary for the performance of official duties relating to the business of entity.

10. Assistance to Accountant

The company accountant can depend on the auditors. The accounting work is necessary for flow of information.

The difficulties, faced by the accountant, can be discussed with the auditor. As he is an expert in accountant so he can guide the accountant to solve his difficulties.

11. Accounting System and Procedure

The auditors can play their role in designing accounting system and procedure for business. It consists of personnel, procedures, records, forms- and devices used by the business concern.

The auditors can devise suitable accounting   system for meeting the business needs.

12. Financial Matters

The auditors can, play their role in financial matters like inventory valuation, depreciation, repair and maintenance.

See Also: Audit Notebook Definition

The auditor can help the management to solve the financial problems. The auditor knows the accounting principles so he can solve such problems.

13. Investigation

The auditors can play their role in investigation. They can examine the business records and other matters to find out the facts behind the books of accounts.

They can detect fraud relating to cash or stock of goods. They can determine real or market value of business.

14. Liquidation

The auditors can play their role during liquidation of companies. They can audit the business accounts during the winding up procedure. They may be appointed as liquidators for the sale of assets and payment of liabilities.

15. Annual Returns

The auditors can play their role in submission of annual returns to the government. The auditor can fill up the printed form for completing the legal formalities. There are so many laws that require annual returns.

16. Preparing Final Accounts

The final accounts include trading and’ profit and loss account, balance sheet and cash flow statement. The auditors can play their role in preparing such accounts.

See Also: Objectives of Audit Working Paper

The legal formalities and accounting principles must be followed in the preparation of final accounts.

17. Planning On Audited Accounts

The auditors play their role in the field of budgeting. The audited accounts are the basis of planning for the next year. The budgets and estimates are prepared.

18. Settlement Of Claims

The auditors can play their role in the settlement of claims. In case of fire or accident the auditors can examine the documents.

They can calculate the exact amount of loss. In this way it becomes easy to decide the amount of claim. The insurers can rely on   the auditor’s report.

19. Feasibility Report

The auditors play their role in preparing the feasibility report. The auditor can use discounted cash flow techniques to inform the prospective investors whether project is viable or not.

In this way they do not allow unprofitable business. They can encourage the prospective investors to start only profitable projects.

20. Company Registration

The auditors can play their role in the registration of new companies. They prepare documents like memorandum, articles of association and prospectus. They issue .certificates and reports for the registration of company.

See Also: Types of Audit Sampling Methods

21. Court Decisions

The auditors play their role in the court of law. They can present the audited accounts to the exact position of business record. The courts can decide the cases on merit basis.

22. Auditing Standards

The auditors play their role in preparing and improving auditing standards. The standards provide the guideline to the individual auditor.