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.
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.
• 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.
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.
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