THE ROLE OF AN AUDITOR IN AN ENTERPRISE

THE ROLE OF AN AUDITOR IN AN ENTERPRISE

1.        SOLE PROPRIETOR: The appointment of auditors to such organization is not statutorily regulated. The appointment, removal and scope of the auditor's work will be the decision of the proprietor.

Advantages

a)     Tax authorities, banks and creditors can gain some confidence from this audited account of such an organization.

b)    Auditor can give advice on cheeks and control that may be useful to the need of the firm.

c)     Audited financial statement of such organization will give the proprietor strong bargaining power to ask for good price at the point of selling the business.

2.        PARTNERSHIP: An audit of the account of a partnership is in the interest of the partners most desirable, but the statute does not require such an audit. This may arise as a result of mutual agreement among the partners. Mostly, the auditors of these firms also act as accountant. It is advisable for the auditor to clearly and expressly define his duty as an auditor an as an accountant.

Advantages

a)     Audit settles dispute among partners because dispute^ results to dissolution of partnership.

b)    Suggestion by the auditor will bring improvement in the system of account in use

c)     When settling retired or deceased partner, audited account facilitate it as it forms the basis upon which to work on.

d)    d. Audited account assists the firm in computation of tax liability by minimizing tax liability of the firm.

e)     Audited account facilitates sale of business, negotiation of loan from banks and others.

f)      The dormant partner will be highly assisted by such audited account. Wide range of professional services could be enjoyed by auditors.

3.        LIMITED LIABILITY COMPANY: Here audits are compulsory under statute. Because of the stewardship of BOD and to protect the interest of the shareholder and creditors the law mandates the audit of such undertakings.

Advantages

a)     The audit of limited liability companies affords protection to the shareholders separated from the management.

b)    The entire economy would prosper when accounts of such organization are audited because there would be more investment, production and employment opportunities

c)     Recommendations by the auditor will improve the system of control by minimizing fraud by its customers, suppliers and employees.

THE ROLE OF AN AUDITOR IN AN ENTERPRISE CAN BE VIEWED GENERALLY FROM THE FOLLOWING ANGLE.

1.     Verification of financial statement

2.     Detection of fraud and errors

3.     Prevention of fraud and errors

4.     Reporting to the management of any enterprise on the weakness in the internal control system.

5.     Offering constructive business advises.

In addition to the above role, the auditor as a chartered accountant he plays the following roles:

1.     Financial advice

2.     Management advices

3.     Design, implementation and review of accounting and internal control system,

4.     Investigation work involving reparation and gathering of information and inquiries.

5.     Tax planning and negotiation.

6.     Insolvency services

7.     Easiness set-up assistance.