General arguments concerning financial audit and related services.
Financial audit engagement is a service with an insurance character in which the auditor expresses his view, in form of a report, concerning the significant aspects of the financial statements compliance with reality, on the one hand the and the observance of principles, rules, criteria established in accordance with a general identified reporting financial framework, on the other hand. The auditor's opinion enhances the credibility of the financial statements giving a high degree of assurance but not an absolute one. The objective of a financial audit is to express an opinion on the financial statements provided by the auditor based on the audit techniques used, with emphasis on testing the efficiency and effectiveness of internal control, on the survey use. Professionals engaged in the audit mission should combine accounting knowledge with those in many other areas such as legal knowledge, tax, management, analysis, mathematics, ethics and others. To fully understand the methods and techniques implemented by auditors, the latter ones must first understand the economic, social and institutional framework in which the audit process is conducted.
The role of financial audit emphasizes the understanding of what is an audit, the way it is conducted and what conditioning it and the professional responsibilities of auditors during an audit.
In addition to financial audits character of insurance services, practices led to the emergence of non-insurance services or audit related activities. Specific to these services is that they do not provide any assurance to the beneficiaries of the work performed by auditors, respectively to stakeholders / affected parties. They are designed to a better understanding of the problems or even solve them but do not increase confidence in terms of relations of the three parties, or overall. The person involved in such a mission may have technical skills, professional education, experience and expertise in consulting, so not all tasks are performed by a professional service and quality insurance (such as tax consulting, and service). Non-insurance services include agreed upon procedures, compilations or other related services
Missions concerning the agreed-upon procedures (1), are those in which an auditor undertakes to carry out those procedures of an audit nature on which the auditor has agreed with the entity and any other interested party and to report on factual findings. The Beneficiaries of the report must formulate their own conclusions, their own opinions based on the auditor's report. The report is addressed solely to the stakeholders who have agreed on procedures performed because other people who do not know why the procedures were applied could misinterpret results, so it makes no explicit insurance.
Compilation missions (1) are those, in which accounting experience unlike audit experience is used to collect, classify and summarize certain financial information. Compilation engagements are those that require hiring a professional accounting. The procedures used are not related and are not derived from the audit, so such type of mission does not express any assurance on the financial information examined. However, users of the compiled financial information, get some kind of confidence through the fact that qualified professional through its participation and competent interventions has been able to create or reinforce impressions and appreciations on which there were doubts.
Related services bring together also the revisions for which exist distinct standards governing the field. They are stipulated explicitly in both commitment letter/ provision contract and also in the professionals' report in order to be no room for confusion. Specific for these commitments is the fact that does not involve an assessment of accounting systems and internal controls nor tests or records of responses to questionnaires. It highlights an advantage given by a lower price than in case of the financial audit which justifies itself in that it provides a simple overview of some aspects of the financial statements.
Other related services made by the auditors include the category of activities for reel off the financial services, consultancy, financial and accounting guidance, for which are limits imposed under the aspect of the general framework applicable to the audit and to related services, being made based on a contract.
It may be conclude the fact that delimitation between financial audit and related services was imposed by the practical realities due to the progress and to the accelerate increase of many other services with an insurance character. The figure below shows the relations between audit, revisions and other certificate services which suits to those with insurance character and specific services of managerial, financial and accounting consultancy, other than those with insurance character, although there is a common area between the consultancy services and those with insurance character, respective specific managerial consultancy.
[FIGURE 1 OMITTED]
THE OBJECTIVES WHICH GOVERN AN AUDIT MISSION
In the last decades has been created an audit domain with proper objectives, techniques and methods to achieve the objectives. Being in a continuous evolution and adaptation to the existing environment, the purpose, the means and techniques used in different types of audit requires a continuous training of the auditors. The need of knowledge and training for themselves, is explained by the fact they make an examination that relates to the accounting domain in the financial situations' conformity with reality on one hand, and good faith application of the principles, rules, criteria established for recording and presentation of accounting information on the other. The financial audit represents a credibility report on the accounting information elaborated by the audited entity. The notification or opinion of an independent professional accountant on the financial situations is the best proof of confidence that it can provide the audited entity.
Basically, the audit is an activity that requires a certain rigors, standards of training, a certain ethical conduct from which the auditor can not deviate.
The users of accounting information use the financial information in decision making, because the latter reveal information, on time, about the entity and also a science - based diagnosis, an assessment of the actual financial position and performance of the entity. The assurance of the credibility Image, is the entity's accounting system through financial statements or specific information provided, made after the implementation of the procedures and methodologies specific to auditors, through expressing the auditor's opinion as an independent professional.
The role of the audit:
* To increase the user's trust in the accounting information
* To give a reasonable insurance on the fact financial situation may be used in decision making
* The accounting information was obtained, overworked, and presented in compliance with the national and international standards.
It is worth mentioning for the missions concerning the agreed-upon procedures, the auditor does not express any insurance because he limits himself to a finding described in the issued report, in order to allow the users of report to form their own opinions.
The objectives of the financial audit provides to the auditor a frame of reference, namely the audit planning guidance, which is the same for auditing all financial statements structures.
It can be concluded, there are presentations according to witch audit is justified only through what it solves, to some extent, the deficit of trust manifested towards the manager/responsible subordinate. There are also concepts concerning the audit which show, especially, the motivational role of it, derived from the fact, in this case, the systematical research would cause a continuous 'discipline" and proficiency for the appointed responsible. Without minimizing the importance and value of such theories, I consider the main justification, purpose and responsibility of the audit consist in the fact that engage itself to offer the investors (shareholders/ associates) a reasonable degree of assurance concerning the activity of the manager vested in him. According to this trust, determinate of the result of investigation upon the way in which the audited entity performs its duties, these are making future decisions and strategies.
(1) IFAC si CAFR, "Audit financiar 2009", Glosar de termeni
Rusovici, A., Farmache, S., Rusu, GH. (2008). Managers in audit mission. Guide for understanding and applying of international standards for financial audit (ISA)," Official Monitor Publishing, Bucharest.
Morariu, A., Stoian, F. (2010). Financial audit-ID. ASE Publishing - Faculty of Accounting and informational management, Bucharest.
Arens, Loebbecke, Keravel, R. (2006). Financial Audit - a totally approach (8th Edition). Bucharest: ARC Publisher.
Financial Audit Magazine (2009-2011). Bucharest: CAFR Publisher.
Hennie van Greuning, (2009). International Financial Reporting Standards. A practical guide," 5th Edition, Bucharest: Irecson Publisher.
Domni soru, S. (2011). Statuar audit and financial comunication, vol. I, Bucharest: Economic Publisher.
official site of IIA: http://www.theiia.org/
official site of IFACI: http://www.ifaci.com
official site of CAFR: http://www.cafr.ro
ANGELA (PETCU) BROJU
Academy of Economic Studies, Bucharest
LIA DORICA (DOGARU) HUSUSAN
Academy of Economic Studies, Bucharest
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|Author:||Broju, Angela; Hususan, Lia Dorica|
|Publication:||Economics, Management, and Financial Markets|
|Date:||Dec 1, 2012|
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