Term Paper on Auditing
Profession
Auditing is an activity, which
provides the risk management, governance and control to an
organization. Internal Audit’s main purpose is to check the
reliability of information, to ensure the compliance of the
organization’s policies and regulations, to protect the assets of
the organization, make it sure that the organization use its
resources efficiently and establish operational goals and objectives
for the organization.
Auditing and Accounting can easily be proved as heart of any
organization. A business or an organization is nothing but numbers,
because the value of assets is expressed in numbers, liabilities,
earnings and losses all are expressed in the form of numbers. Even
if we trust that everyone in the world represent the numbers
portraying their business honestly, we still need an Auditor or
Accountant to tell us where these numbers come from.
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Hence it can easily be noticed that the job of accountant is very
important. It is the duty of an accountant to manage the numbers in
a way that they will become according to the commonly understood and
accepted rules. This also leads to the very important role of an
auditor, whose duty is to make it sure that the numbers must be
calculated using the commonly understood and accepted rules and they
are portraying the business honestly. The duty of an accountant and
auditor is to describe the rules by which the numbers are derived
and to ensure that they are derived and reviewed in accordance with
the rules without any partiality or bias.
The history of Internal Audit is more than hundred years old, but
still Internal Audit is considered a relatively new profession. The
Institute of Internal Auditors (IIA) was founded in 1941 and has
almost 66,000 internal Auditors from over 125 countries.
Internal Auditors test not only the accuracy of the accounts of an
organization, but also the efficiency and effectiveness of an
organization and whether it is in compliance with the laws and
policies established by the organization. Audits can be classified
into the following categories:
• Financial Audits: It is the analysis of economic activity of an
organization as measured by its financial statements.
• Compliance Audits: Compliance Audits review both, the financial
Statements and the operating control of an organization. With the
help of compliance audit, it can easily be found that whether an
organization is in complete compliance with the laws, regulations,
rules and policies established by it.
• Operational Audits: The purpose of operational audit is to ensure
that the management of the organization is meeting the goals, set by
the organization, at minimal cost.
Factors affecting Auditing Profession
In the current business world, there are certain factors that are
affecting the profession of Auditing. Some of such factors are:
• Information Technology: Computer systems, inter-linked computer
networks, the Internet etc. are used in large and medium sized
organizations to create powerful and flawless processing and
communication. This extensive use of computers has changed the
environment and transformed all the methods of planning and control.
The change of planning and control methods also affected the
Internal Audit of the organization.
• Marketing: Many major companies, in order to retain and build
customer base have used focused market research. In such situations
the major firms need an audit personnel who have an extra technical
and business knowledge. The business knowledge is important because
auditor must know the dynamics affecting a client’s business
activities.
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• No job Security: In the present business world, it is not possible
to have a job security for life. Employee’s future depends upon the
level of contribution he or she is making to the demands of the
management. The organizations need to attract and retain highly
competent staff. This behavior of organizations needs a modification
in the current personnel and remuneration policies.
• The changes in Revenue Collection Policies: There have been many
changes and major developments in the assessment of taxes and
revenue collection.
• Labor Laws: the labor laws have also changed extensively, this
will increase the burden on organization’s employees and their
remuneration policies.
• Government: In the present world of regional and metropolitan
governments, organizations have to learn how to deal with the
increasing influence of the bureaucracy.
Depending on the above-mentioned factors, the auditing profession is
going to face many challenge in the future like:
• The in-house training for technical, professional and business
development will become necessary in future for the auditors to
manage their professional responsibilities according to the
expectations of the management and the clients.
• It will be important for the organizations to manage and maintain
it according to the needs of their clients.
• Present business world is the world of competition, so the clients
also expect more from their respective firms. To fulfill the demands
of their clients, the management of the organizations demand
specific and frequent recommendations for improved business
performances from their auditors.
• The world is rapidly transforming into a global community. This
situation requires some fully integrated international organizations
with uniform auditing policies and high quality standards. There is
also need for extraordinary leadership qualities and efforts by
audit firms, to overcome many difficulties like, the weak
country-specific regulations etc. This will be the duty of audit
firms to enforce the uniform accounting and auditing standards.
• The biggest challenge for the Auditing profession is the declining
rate of college and university students in auditing courses. This
decline is due to many factors which includes the heavy workload,
increased educational requirements, issues of family or life style
etc., but the most important factor is the emergence of new career
opportunities which are much more exciting, rewarding and
challenging than auditing. These same issues also affecting the
auditing firm to retain their auditors for long term.
At present, Auditing profession needs to attract much more personnel
with extra business skills and technology education to fulfill the
demands of providing assurance on additional and new forms of
financial and non-financial data.
Conclusion
With the presence of all the above-mentioned factors, which affects
the Auditing profession, this profession needs best people to face
the challenges of the future. To do so, it will have to demonstrate
the worth of the profession. This effort will require the
partnership and cooperation of the audit firms, professional
societies and the academic community. It has been often said
and believed that in a near future the audit profession will undergo
some dramatic changes due to the above-mentioned factors. In this
scenario, it is the duty of the audit firms to do their best to
uplift the declining rate of students of auditing in the academies.
It is also their duty to develop and maintain uniform rules and
regulations of auditing with the help of an international auditing
organization and improve the standards for auditing to fulfill the
demand of a global community.
References
N. Byrnes, M. McNamee, D. Brady, and L. Lavelle, "Accounting in
Crisis," Business Week, January 28, 2002
Will CFIA Transform Internal Auditing? July 30, 2002 http://www.dartmouth.edu/~msimmons/internal-auditing/cfia.htm
Keith Rowden, Don't shoot the auditor - aim for higher standards,
April 2002, http://www.pwcglobal.com/ru/eng/ins-sol/issues/02-04-01_kr_O&C.html
Robert Tie, Concerns Over Auditing Quality Complicate the Future of
Accounting, 1999, http://www.aicpa.org/pubs/jofa/dec1999/html/news_sr.html
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