The role of the independent auditor is to plan and perform the audits in order to obtain reasonable assurance of the financial records of the business and ensure these records are free from material errors. The independent auditor assesses the effectiveness of a company’s internal control system and its financial statements in order to develop an opinion as to the accuracy of these systems. Additionally the independent auditor’s task aims at addressing the risk of material errors and misstatements in the company’s financial records. The primary goal of external auditing conducted by independent auditors is to determine the extent to which the company adheres to managerial policies, procedures, and requirements. The independent auditor then forms an opinion as to the fairness and dependability of the statements of the company. This opinion is communicated to the appropriate body or board in the form of a report.
An independent auditor’s report is a formal opinion or disclaimer issued by the auditor concerning the accounting records, financial position, and the internal control system of a company. These reports are not evaluations but merely opinion as to whether the information existing is accurate and free from errors. These reports can contain unqualified opinion and this implies that the auditor’s opinion is that the financial accounts give a true and fair representation of the company. On the other hand, a qualified opinion report indicates that the auditor identified a few areas that do not comply with the required standards but the rest of the financial statements are presented fairly. An auditor can also give an adverse opinion report where the auditor establishes that the financial reports of the company are materially misstated and when considered in its entity they do not conform to the required standards. However, an auditor can fail to form a formal opinion usually due to various reasons and such an opinion is termed as a disclaimer of opinion.
The independent auditors make these reports on the fair presentation of the company financial records in accordance with any professional standards. The standards that govern independent auditors are either the Generally Accepted Auditing Standards (GAAS) or International Standards on Auditing (ISA). The independent auditors make reference to these standards in forming an opinion on the company’s financial presentation and in coming up with the auditor’s report.
The purpose of these auditing standards is to provide engagement standards for the profession, outline the procedures to be followed, establish a guideline on engagement and set out professional ethics. The Generally Accepted Auditing Standards provide for the qualifications on an auditor and provides for the standard of work expected from an auditor. It also provides for the performance of the audit report and sets out the prerequisites necessary for the auditor to act independently. In essence, these standards govern the engagement of an auditor in conducting the audits. Similarly, the International Standards on Auditing governs the engagement of the auditor in forming an opinion on the financial position of the company. In addition, these standards provide for the responsibilities of the auditors and provide standards for the performance of audits. Conversely, the standards set out how audits are conducted including planning of audits, the collection of evidence, working with experts and the formulation of audit reports. Simply put, these standards define how auditors should conduct audits.