Abstract

The auditing profession has been at the centre of major corporate

failure. In this report they will be a through and descriptive
discussion which will analyse the key roles of auditor and functions
and the cause of the companies failing due to the unsupervised
audits. These will give a major overview on the whole auditing topic
and also reasons of major corporations failing such as Enrons
Corporation.

Audit
To understand this report one must first acquaint the knowledge to
understand this report so therefore to make life easier for every one
first of all we will start off with the explanation of what is an audit?
An audit is an accounting procedure under which the financial
records of a company or individual are closely inspected to make
sure that they are accurate. (Price water house coopers, 2014)

Types of Auditors
Now moving on how many types of auditors are they? They are 4
types of auditors which include internal auditors, External auditors,
Government auditors and Forensic auditors. (Farrell, 1998)
Starting with internal auditors we raise the question that what are
internal auditors? An internal auditor is a person who is hired by the
business to examine only the internal financial documents and
records which relate to the business and the role an internal auditor
is to maintain the highest level of accuracy in the financials of the
business. High accuracy is required to avoid any monetary and legal
problems. (Farrell, 1998)
Now moving on to external auditors they perform the same task as
the internal auditors but there is a difference and that is that they
are not permanent staff of the company they are auditing (Farrell,
1998).

1 | Page

External auditors are an independent body who are called upon to

conduct an independent audit in which they produce an audit report
which is compared to the internal audit report which has already
been produced by the internal auditor. This is done to gauge the
level of accuracy and as well to detect any fraud being committed or
any scandals. External auditors are also referred to as unbiased
auditors (lacoma, 1999-2014).
Government auditors these are people who a hired by the
government

to

conduct

audits

on

government

sectors

and

departments. These type of auditors also carry out audits on

individuals and companies and these type of audits are carried out
to apprehend cheaters and to also to gauge the level accuracy in
the financial documents of companies and mainly to catch any
scandals and frauds. These all done to see if the companies and
individuals are complying with the taxation rules of the country and
that no fraud is happening. The government auditors investigate
suspicious activity for government entities and also clear up any
doubts. (lacoma, 1999-2014).
Now finishing of with forensic auditors. Forensic auditors specialize
in crime cases whereby the financial documents of a company or
individual where involved in a crime. This type of auditor is used to
track the money as where it came from and where did it end up and
this information is used by the law enforcement organization. The
crime can not necessarily be a financial crime but although this can
be the case in some situations (lacoma, 1999-2014).

Roles and Functions of an Auditor

The explanation of auditors has been as through as possible and
moving on the roles and function of an auditor. As we have seen
they are 4 types of auditors and you must be wondering that they
must being sharing similar roles and functions and the answer is yes
but also no due slight differences in the roles and functions.
(Auditors-General, 2014).
2 | Page

Beginning with internal auditors. Their main role within a company is

to evaluate how well risks are being managed, also the way the
business is being governed and that internal processes are working.
They also provide a consulting service, advising management on
how to improve systems and processes. (Auditors-General, 2014).
For an internal auditor the scope and nature of audits can vary
significantly but the main priority of the work is to make sure any
issues that affect the survival and prosperity of the business are
dealt with. (Auditors-General, 2014).
The function that the internal auditors serve is that the work of an
internal auditor differs to that of external auditors as they look at
more financial and accounting risks. They also consider factors such
as

reputation,

growth,

environmental

impact,

treatment

of

employees and ethics. (Auditors-General, 2014).

Their work helps senior management to provide evidence to
stakeholders that they are managing the business effectively.
(Auditors-General, 2014).
Going on to external auditors, the role of this type of auditors is to
carry out an independent and unbiased audit and also to analyse
every nuke and cranny of the companys financial documents and
accounting policies (Ooi, 2008).
The main function is to look for any frauds and to also check the
accuracy of the financials and thus comparing with the internal audit
report to find any problems or mistakes made by the internal
auditor. Thats why this type of auditors are called external auditors
as they are independent and unbiased. This types of auditors
function is basically to find any problems within the company
financial documents and accounting policies (Ooi, 2008).
Moving on further we go on to discussing the roles of Government
auditors and their main roles are to carry out audits on private
companies and government departments to check that the taxation
3 | Page

has been in the right way. They share similar roles as Internal and
External auditors but only main difference would be the purpose of
the audit and that is the main difference between the types of
auditors. (Auditing, 2014).
The function that government auditors serve is that they audit
companies and government sectors and departments this is done in
order to inspect that all the financial documents and records are
kept in line and meet the policies of the country and that they are
not violating any of the rules and regulations of the taxation
regulations of the country. This helps them identify any companies
or government sectors departments who causing a truancy of the
rules and regulations of the country. (Auditing, 2014).
Coming to the final, the role of a Forensic auditors is to assist law
enforcement organizations in cases where financial documents and
records have been involved in a crime or fraud. Therefore the role
this type of auditor is assist and law enforcement in solving cases
related to companies or individuals. (Hamid, 2009).
Functions that are provided by government auditors are to track
where money came in and where did it go out and this did done to
easily track any money laundering and fraud. Their main function is
to help law enforcement in solving financial crimes. (Hamid, 2009).
All the 4 types of auditors share common roles and functions and
these are to analyse the financial documents and records and also
to report the findings of the analysis. In some way or another they
all carry out an audit. Auditors have to keep in check that the
companies are following the accounting principles and that they
implementing them (Hamid, 2009).

Challenges faced by auditors

All types of auditors face similar challenges and one of the
challenges is the ever changing audit compliance rules. This hinders
the auditors to carry out the audit as they first have to familiarise
4 | Page

themselves with the change is rules of the audit and this is very
time consuming and tedious work to do. (Wrix, 2014).
Auditors face an issue of insufficient information in order to conduct
a proper audit and this also consumes time. Also companies and
individuals dont keep a full record of everything monetary and this
cause problems in audits. (Cassim, 2014).
Tight budgets on which an auditor as to carry out a full audit. As
auditors are given a budget in which they have to conduct an audit
and this can be difficult at sometimes as some audits require a
bigger and more flexible budget and along with that they have to
maintain a high level of efficiency. (Cassim, 2014).
Auditors have to have full insight on a companys and individuals
details and this is very difficult to obtain as people are very
reluctant to disclose information to the auditors and this sometimes
leads to something being missed out which causes lots of problems
and also this is a very tedious work. (Wrix, 2014).
The ever increase in computer technologies and softwares which
auditors have to spend time on to understand and which also time
consuming. (Wrix, 2014).
All the auditors have a problem and that is time and due to an
increase in the challenges faced by auditors this is wasting their
precious time which can be used in auditing. (Cassim, 2014).
Auditors face a great deal of paper work that they have to go
through and check this is a very long process and requires a lot of
man power. The amount of work load of going through the paper
can take a total on the auditor and lead to mistakes happening.
(Cassim, 2014).

Solutions and Recommendations

All the auditors must join or subscribe them self a membership to
the international auditing standards community in this way they are
5 | Page

always up to date in any changes in audit compliance rules or

regulations.
Companies and individuals must be encouraged by auditors to keep
a full monetary records no matter what in order to conduct a quick
and swift audit with no hassle.
Auditors must give surety to their clients that they will keep all
company information and individual a secret and will not share or
disclose any information to a third party.

Companies who demonstrated a failure in its

audit
A company that will show the best down fall would be Enron
Corporation as this company had gone bankrupt!
The main reason of their bankruptcy was mainly due the down fall in
the accounting department. This was because the companys
managing directors were hiding company information which was
misleading the auditors and as well as the public as this was

listed company and it was always showing a profit but internally

they have been making a bigger loss as the years went by (Times,
2014).
This lead to Enron Corporations down fall and being one of the top
ten bankrupt company in the United States of America. (Times,
2014).
This is a short overview of the company and the major failure was in
the auditing department but one must consider other factors which
were also in play. To read about the factors please visit the New York
Times website. (Times, 2014).

6 | Page

References
Auditing, A. C. (2014, August 6). American Center for Goverment Auditing.
Retrieved from ACGA: https://acga.theiia.org/
Auditors-General, A. C. (2014, August 4). Australasian Council of auditorsgeneral. Retrieved from Australasian Council of auditors-general:
http://www.acag.org.au/roag.htm
Cassim, T. &. (2014, July 15). Challenges faced by Auditors. (A. Y. Sidat,
Interviewer)
Farrell, B. a. (1998). The Changing Role of the Auditor: An Analysis of
Viewpoints from the Auditors' Perspective. In B. a. Farrell, MidAtlantic Journal of Business (p. 101). New York:
http://www.referenceforbusiness.com/encyclopedia/AssemBraz/Auditing.html.
Hamid, K. T. (2009). Bayero Business Review. In K. T. Hamid, Bayero
Business review (Vol. Volume 3 Number 2 , pp. 15-19).
lacoma, T. (1999-2014, August Tuesday). Ehow.com. Retrieved from
Ehow.com: http://www.ehow.com/info_7754377_types-auditors.html
Ooi, F. (2008). The Institute of Chartered Accountants in Australia. The role
and function of external auditors, 1-5.
Price water house coopers. (2014, August Tuesday). www.pwc.com.au.
Retrieved from
http://www.pwc.com.au/assurance/financial/statements/audit.htm
Times, T. N. (2014, August 16). The New York Times. Retrieved from The
New York Times:
http://www.nytimes.com/2001/12/03/business/enron-s-collapse-theoverview-enron-corp-files-largest-us-claim-for-bankruptcy.html?
pagewanted=2
Wrix, N. (2014, August 13). Net Wrix. Retrieved from Netwrix 1 for chande
auditing: http://www.netwrix.com/audit_challenges.html

7 | Page