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The Changing Roles and Responsibilities of Auditors

Audit reports play an important role in every organization. It is an essential tool for businesses to make decisions for the company in the future based on the results of the audit. But who makes these audit reports? Auditors are responsible for the accuracy, credibility, and reliability of the financial reports. Often times, accountants and auditors work together to perform their duties, resulting to confusion with regards to their differences to the public. This has created a very difficult task for the auditors to explain to the public what their role exactly entails and how it differs from that of the accountants. Compared to the traditional way of how auditors performed their jobs, today’s auditors use more advanced technologies that have affected their roles and responsibilities

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Technology has dominated and will continue to innovate in the world of communication, transportation, information processing, entertainment, health and especially in business. Technology is crucial in every job to be competitive and to remain in the business. Sometimes, it encourages unethical behavior. It has advantages and disadvantages, depending on how people use it. But one thing is for sure, it has changed the roles and responsibilities of auditors (Lee 2-13).

Auditors are categorized into two types: Internal Auditors & External Auditors. Both the internal and the external auditors have a sole duty of enhancing the effective controls on the financial statements. They are charged with the adherence to the code of ethics and the professional standards as they are set by the professional bodies. Internal auditors are part of the organization. Their objectives are set by professional standards, the board, and the management. The management and the board are their main clients. They have a wide scope of responsibilities. They help the organization attain its objectives; improve operations, risk management, internal controls, and governance processes ( They are also involved in detecting and preventing fraud in any form. The main duties of the internal auditor are to oversee the audit function within the organization. The internal auditor ensures that the audit procedures within the company are all within the laid down procedures. He/she is responsible for ensuring that the entire audit staff within the organization performs their duties as expected within the audit statutory. The internal auditor should especially ensure that the work of the audit staff is very independent and properly conducted. The internal auditor is also responsible for the internal risk controls, planning the audits as well as organizing the audit programs for the company. On the other hand, external auditors are not part of the organization. Their objectives are set by statute or legislative acts and their primary clients are the board of directors ( Their main goal is to provide an independent opinion on the organization’s financial statements for each year. “They evaluate these statements whether they adapted with Generally Accepted Accounting Principles (GAAP), whether they presented their financial status fairly, whether their results of operations in a period were accurately represented or whether the financial statements were materially affected” ( ). The external auditors normally review the general application of the audit controls within the organization. These are the controls that mainly affect the records, assets, and financial statements of the organization. The auditors examine the financial statements of the organization together with recorded transactions of the company. The external auditor also evaluates the effectiveness of the internal control system of the company (Krist, 2-13).

In the late nineteenth century, the roles of the auditors were defined as one of enhancing the credibility of the financial statements and also supporting the effective performance of the stock market. At the beginning of the century, the corporations and organizations were under no obligation to submit the financial statements neither were they required to have these statements audited. All the financial details of the companies were regarded as private affairs of the company. By 1970,s the work of the auditors was understood as a role of reassuring the public of the truthfulness of the financial statements and ensuring that the statements were presented in a very fair manner. The insecurity of the investors’ investments in the 1929 stock market gave the need for the effective role of the Auditors to the public. Auditors were responsible for detecting fraud in the financial statements. According to Lee, “The nineteenth century is always referred to as the period which the auditing career made historical changes especially with the introduction of laws within the field”. This included the English Companies Act. This Act brought out the importance of professional auditors who could perform their duties more independently (Lee, 1988).

The main objective of auditing in the nineteenth century was to ensure that the financial statements were accurate and they were free of errors and fraud. The financial institutions now started lending money based on the financial statements of the borrowers. The audited financial statements also became very useful in the business world for evaluating the performance of the entities. The crash of the 1929 stock market saw the government involvement in the work of the auditors. The US government required most of the businesses to improve on their standards and also to maintain publicly traded securities that reflected truthfulness in their financial status (Lee, 1988). The government launched the Securities Act, the Federal Trade Commission, and the Securities and Exchange Commission. The laws that were within the federal commission required the institutions and business entities to file their balance sheet and the income statement with the commission. The financial statements also needed to be certified by an independent accountant. The financial statements such as the balance sheet were required to demonstrate all the property owned by the company at the specific time of the presentation. The nineteenth-century also saw the introduction of computers to the field of auditing. This marked the commencement of computerized audit and this has advanced over the years with the growth in technology. (Lee, 1988)

During the Second World War, computers were introduced to perform complicated mathematical procedures. By the early 1950,s many businesses had taken notice of the developing computer technology and they took advantage of this to make their work easier. The accountants had for a long time tried to find ways to reduce the workload of bookkeeping. They first attempted to use the punch cards but this was not successful. Gradually, the accountants managed to transform their manual work into more cost-benefit computer technologies. This saw the complete change of the audit work from manual recording into storing data in the magnetic tapes and also floppy disks. The discovery of computerized auditing triggered the need for new and modern internal controls. Strong and computerized internal controls were essential in the business environment to ensure the success of the computerized audit.

“Technology is rapidly changing the nature of work of most accountants and auditors” (Bureau of Labor Statistics, 1). As the business world continued to indulge in the more sophisticated nature of business, the audit career also needed to grow to cope with the changing business environment. Accounting principles have been changing over the years and there are also changes in the internal controls. The introduction of computerized auditing and accounting has played a major role in modernizing the work of auditors. This has changed the way auditors perform their duties and this has been accompanied by various challenges. One of the greatest challenges that have come with the computerization of auditing is the duplication of the work done by the internal and the external auditor. The introduction of technology in the field of auditing has declined the importance of traditional auditing. This has necessitated the upgrading of the careers by most auditors since the lag in the technological developments would mean losing their jobs. The use of technology in auditing has been challenged that it will interfere with the judgment and the decisions made by the auditors. It is feared that with the rising technology in communication, the role of deciding on the financial statements may finally be transferred to the junior audit staff.

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Today’s audit has been incorporated with different products of technology. This includes the products such as the multiple audit planners. This is a product that enables the auditors to record information on the matters that are concerned with the decision-making of the different business units. This includes the information that is related to the audit scope, clients, and also risk control. This product enables the auditors to plan more efficiently and consistently for the audit. Another technological product in today’s audit is the Planet. This is a product that is designed to assist in the identification of certain risks within the business and also the selection of the audit procedures. This has enabled the auditors to identify the business risks and also manage the risks more easily and efficiently. The controls within the business environment have also been updated to match with the technological controls. The controls that are currently in the audit field support a faster way of documenting the financial statements, evaluation, and also testing of the controls. This has improved the effectiveness of the audit process. The improved controls have enabled the internal auditors and the external auditors to rely more on the computerized systems. Effective controls enable the whole system of audit to be more integrated and make it very easy for the staff to understand the system controls. There is also the systems auditor technology which is used by the audit specialists to support their IT duties. This has improved the means of communication between the IT auditors and the field auditors. TeamMate is another technological product in auditing. This is a product that enables the creation of electronic working papers. This in turn enables the creation of documents that contain graphics, cross-referencing, indexing, client documents, and also text. This helps in making clear audit trails, making reports, the efficiency of data storage, improvement of the access controls and security of information, and also automatic referencing. The other audit product that is associated with technology is the Predicts. This is product enables the auditors to make use of the multiple regression analysis. This is a very critical statistical tool that helps the auditors define the relationship between the dependent and the independent variables within the organization.

The increasing dependence on the technology for most audit work has resulted in auditors relying on the technology for the audit evidence. This has been referred to as electronic audit evidence. This refers to the information that has been created, communicated, recorded, or stored electronically in such a case that the auditors have to rely on this information to prepare the audit reports. The information that is stored electronically can only be accessed through the computer unless the information has been printed on a soft copy (Caster). The electronic information that is stored for audit purposes can be stored in form of text, images, audio, and also videos. The electronic audit evidence for the auditors includes the accounting records that are stored in the computer memory such as the general ledgers, source documents, journals among other records used for audit. Electronics audit evidence is different from traditional audit evidence because it is very difficult to find out its source. The auditor cannot be able to detect any alterations made to the information. It is also very difficult for the auditor to be very certain about the approvals made to the financial statements and also assess the signatures made on the documents (CICA).

Electronic audit evidence has therefore been questioned on its reliability in preparing the audit reports. It has been cited as a great risk to rely on this evidence since it does not provide sufficient evidence about the authentication, authorization, integrity, and also sources of the information. These are very essential tools in the preparation of the audit reports and they have upheld the importance of the traditional audit evidence (CICA). This is because the preparation of the audit reports relies so much on the nature and the source of the information required by the auditors The information that is normally stored as soft copies are usually print outs from the computer memory and therefore relying on them is simply the same as relying on the information that is stored electronically. This raises the importance of having effective computerized controls within the institutions since the auditors will have to rely on the evidence created from these controls. The auditor must ensure that the information that has been created from the controls is very reliable to provide an audit report that can be relied upon by other users of the same report (Caster).

In conclusion, technology has come to make the work of the auditors much less and easier. The traditional audit work used to be very cumbersome and involved a lot of manual paperwork. With the introduction of technology, the traditional audit methods have been outdated and most auditors concentrate on the computerized audit. Even though technology can be praised for the advancements it has brought to this field, some challenges have accompanied it and it is therefore threatening the reliability of the audit reports prepared from the technological information. It is true that as the other fields grow with technology, the auditors’ work should be updated to fit with the technology but some adjustments should be accompanying the technology to ensure that the work done by the auditors is not compromised in the future.

Works Cited

  1. Austin, Hal. “Putting Auditors Under the Microscope.” Financial Times 2008. LexisNexis Academic.
  2. Bureau of Labor Statistics, “Occupational Outlook Handbook”, U.S. Department of Labor, 2008- 2009 Edition.
  3. Caster, Paul and Dino Verardo. Technology Changes the Form and Competence of Audit Evidence”  2007. New York State Society of CPA.
  4. CICA. Electronic Audit Evidence – Executive Summary. Chartered Accountants of Canada. 2008.
  5. How Do Internal and External Auditors Differ and How Should They Relate?” The Institute of Internal Auditors. 2008.
  6. Krist, Martin. Standard for Auditing Computer Applications. Auerbach Publications. 2nd Edition. 1998. Print.
  7. Lee, T. A. The Evolution of Audit Thought and Practice. New York: Garland Publishing, Inc. 1988. Print.

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