Audit and financial statements Essay Example | Topics and Well Written Essays - 2250 words

Audit and financial statements - Essay Example The scope of external auditor's work covers the audit of financial statements, probity in the use of public money and value for money in the use of resources. Internal auditor objectively examines, evaluates and reports on the adequacy of the internal control environment as a contribution to the proper, economic, efficient and effective use of resources. External audit is conducted in accordance with International Standards on Auditing (ISA) and with the Audit Commission's Code of Audit Practice. Internal audit's strategy and plan is agreed between internal audit and management. It is approved by the Audit Committee and cannot be directed by external auditor. Effective co-operation between external auditor and internal auditor means more than avoiding duplication. An effective framework of co-operation and co-ordination ensures liaison, co-operation on work programmes and the sharing of information. This can be achieved through: The external auditor has various responsibilities when it comes to performing the audit. It is the responsibility of the external auditors to perform audit of financial statements in such a way that they areable to form opinion, including: Auditors have a responsibility to satisfy themselves that the audited body has put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. While doing so, the auditor must consider and assess the relevant significant business risks. Auditors are not required to report to audited bodies on the accuracy of performance information that the audited bodies publish. Auditor's work is limited to review of the systemsput in place by the audited body to collect, record and publish the information. Nor are auditors required to form a view on the realism and achievability of the assessments published by those audited bodies. The auditor's report should contain a clear written expression of opinion on the financial statements taken as a whole. The auditor's report includes the following basic elements: (a) Title (b) Addressee (c) Opening or introductory paragraph containing (i) Identification of the financial statements audited (ii) A statement of the responsibility of the entity management and the responsibility of the auditor (d) Scope paragraph containing (i) A reference to ISAs or relevant national standards or practices (ii) A description of work performed by auditor (e) Opinion paragraph containing (i) A reference to the financial reporting framework used to prepare the financial statements (ii) An expression of op