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What are international auditing standards?

What are international auditing standards?
What are international auditing standards

audit

An audit is an objective evaluation and examination of an organization's financial statements to ensure that records are fair and accurate. An audit can be conducted internally by an organization's employees or even externally by an outside company. The IRS can also conduct audits to verify revenue, pay taxes, etc. An audit is a financial audit that examines financial records. To determine its accuracy and compliance with the applicable rules, especially international auditing standards, accepted accounting standards, regulations and laws, the law also requires that all public companies must have externally audited financial statements, while other companies are not required to possess it, and the organization’s internal auditor acts as an internal employee to examine Records and help improve internal processes such as processes, internal controls and risk management.

international auditing standards

Public auditing by independent and impartial accountants has acquired a professional status, whereby the public accountant performs tests to determine whether management statements have been prepared in accordance with generally accepted accounting ideas and fairly present the company's financial role and running results. High standards are encouraged by professional societies, and the UK has also developed their own admission criteria.

Perhaps the most familiar type of audit is management audit, in which individual vouchers, invoices, or other documents are checked for accuracy and appropriate authorization before they are paid or entered into the books. For iron, auditing has become a necessary part of modern business, and the audit profession has evolved to meet this growing need.

In 1892 Lawrence R. Dixie - A Practical Guide for Auditors - The first textbook on auditing and resulting in improved standards that guide the audit process, which later led to the emergence of what are known today as International Standards of Auditing. In the twentieth century, the potential for conflicts of interest has made it increasingly necessary for the auditor to explain the nature of the work performed and the degree of his or her responsibility. It is supported by the International Accounting Standards Board (IASB) in London.

GAAS . Generally Accepted Auditing Standards

Generally accepted auditing standards are a set of methodological and guiding principles for auditors, and when conducting an audit of corporate finances also to ensure accuracy and to verify the procedures and reports of auditors, and based on international auditing standards, the accepted auditing standards are 10 standards divided into the following:

1- General Standards

They are general standards that have been agreed upon by the Auditing Standards Board and the Accounting Oversight Board, and they are standards specific to the auditor in general, such as independence, efficiency, and others. They are standards that concern the auditor more than the audit process itself and field work, and they are as follows:
  • The auditor must be technically trained and competent enough to perform the audit.
  • The auditor shall maintain independence of mind in all matters of the audit.
  • Professional care should be exercised in performing the audit and making ready the report.

2- fieldwork standards

They are general standards agreed upon by the Auditing Standards Board and the Accounting Oversight Board, and they are standards specific to field work in general, such as internal control and audit evidence, and they are standards concerned with field work more than the audit process itself and the auditor, and they are as follows:
  • The work have to be safely planned and appropriate supervision of any assistants.
  • The auditor must obtain an understanding of the entity, its environment, and internal control, in order to assess the risks of errors in the financial statements, whether they are by error or fraud.
  • The auditor should obtain appropriate audit evidence from audit procedures to provide a reasonable opinion on the financial statements.

3- reporting criteria

They are general standards agreed upon by the Auditing Standards Board and the Accounting Oversight Board, and they are standards related to the audit process and its results in general, such as cases of error and error reporting and disclosures, and they are standards concerned with auditing and its results more than the auditor and field work, and they are as follows:
  • A mention should be made in the auditor's report if the financial statements are presented in accordance with generally accepted accounting principles.
  • The auditor's report shall specify the circumstances in which the principles were not observed.
  • The auditor should indicate in the report if the news disclosures are not reasonably sufficient.
  • The auditor must express a general opinion on the financial statements, and when he is unable to express a general opinion, the auditor must state the reasons in the report, and in all cases where the name of the auditor is related with the economic statements, the auditor should honestly nation the nature of the auditor’s work. 

auditor report

It is a report that explains the company’s financial statements and whether they comply with generally accepted accounting principles. It is a written message attached to the company’s financial statements in which the auditor expresses his opinion on the company’s compliance with standard accounting practices. The report consists of three basic paragraphs where the first paragraph states the responsibilities of the auditor and the manager The second paragraph is the scope and refers to a set of standard accounting practices. The third paragraph gives the opinion of the auditor. It is feasible to add a paragraph to inform the investor of the outcomes of a separate audit on another job of the entity.  The majority of audits end with unqualified or clean opinions, and there are three cases in the report. They are qualified opinion, adverse opinion and disclaimer, the latter type indicating that the auditor has doubts about material misstatements or misstatements in the financial statements and does not have sufficient evidence to express this opinion clearly.

The difference between internal and external audit

There are several differences between the functions of internal auditing and external auditing, they are completely different, and larger organizations usually have two functions, which ensure that records, operations and financial data are closely audited at regular specified intervals, and in general, their forms must comply with international auditing standards, which are as follows:
  • The internal auditor is an employee of the company, while the external auditor works in an external auditing company independent of the company being audited.
  • The internal auditor is employed by the company, while the external auditor is employed by shareholders' vote.
  • The internal auditor is responsible to the company's management, while the external auditor is responsible to the shareholders.
  • The internal auditor can produce findings in any form of reports, and the external auditor must use specific formats for audit opinions and management messages.
  • The internal auditor can be used to provide advice, etc.
  • The external auditor is restricted from closely supporting the audit client.
  • The internal auditor examines issues related to the company's business practices, while the external auditor examines the financial records and issues an opinion on the company's financial statements.
  • Internal audits are conducted throughout the year, while the external auditor has one annual process, and if the client is publicly owned, audit services must be provided three times a year.
  • External audit is binding on public shareholding companies, while internal audit is not.
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