Internal and External Audit Processing

Document Type:Research Paper

Subject Area:Finance

Document 1

The practice boosts the productivity of the organization and facilitates discipline in the manner of handling business transactions. The end product as a result of the audit process is accurate information which is relied upon by organization’s management in making strategic decisions. Additionally, investors utilize the audited financial statements in making a financial decision that ranges from whether to invest or not based on various aspects. The audit process is, therefore, a necessity for any organization with the aspiration to attain greater heights within the required procedures of financial prudence. Internal and external auditing practice lays a benchmark within which the entity transactions are carried out and brings out the best due to the prevention of losses. The audit process is dependent on the quality of the procedures in identifying the risk prone areas of the financial reports to deliver the best for the market.

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The essence of an audit engagement has been to deliver assurance to the users of the financial statements in asserting substantive developments in the management of the financial framework. The aim of the study is to dwell into the significance of the external audit function based on its relationship with the internal audit process. Internal audit initiates a model that allows for the initiation of internal mechanisms responsible for enhancing the existence of a strong set of internal controls making it possible to advance the quality and ease of external audit. Research Questions and Problems The research question will seek to address the role of internal audit in improving the quality of the audit. The tools and tests an auditor applies will solely depend on these risks too.

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The auditor embarks on field study where tests are carried out on the transactions using the controls set up at an earlier stage to determine whether they are effective. The techniques set up such as sampling helps the auditor test various internal controls and other transactions' accuracy, existence, and completeness. During the audit process, there is communication between the parties which offers the client a glimpse of the ongoing activity so that they can disclose more information to the auditor (Vasarhelyi, Alles, & Kogan, 2018). The auditor finalizes his report by concluding the findings and recommendations to be implemented by the management. External Audit Process Conversely, the external audit process is a step by step audit procedures performed by independent individuals who are hired by shareholders to find out whether the company transactions are carried out within the required law.

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They are examinations independent in nature and carried out in a specific manner determined to reveal any loopholes or malpractices with the operations (Simon, Yaya, Karapetrovic, & Casadesús, 2014). The external process of an audit is almost similar to the internal process apart from a few elements which are accomplished in the external audit which is however detailed. The audit process in external audit commences with a request for the documents from the client by the audit team. The documents include critical information about the client for example bank accounts, previous audited financial reports, company bylaws among other copies such as committee minutes. The audit report from external auditors is for the shareholders and directors of the company who want to know the performance of the company based on the findings.

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Research Methods The research methodology will involve the reliance on both primary and secondary data sources. The data collection methods take a model of both the qualitative and quantitative frameworks that initiate the significance obtaining information that competently addresses the research questions. The methodology employed recognizes the need to have in place a system that takes cognizance of the input by different stakeholders. An interview process will be employed to advance the need of creating a mechanism responsible for establishing better input into the audit process.  Quantitative data analysis with IBM SPSS 17, 18 & 19: A guide for social scientists. Routledge. Burt, I. , & Libby, T. The Impact of Organizational Identity and Professional Norm Salience on Internal Auditors’ Assessments of Internal Control Weaknesses. Managerial Auditing Journal, 21(1), 81-101.

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