Corporate Governance and Ethics

Chapter 9

External Auditors' Roles and Responsibilities

INTRODUCTION

EXTERNAL AUDITING AND CORPORATE GOVERNANCE

EXTERNAL AUDITOR RESPONSIBILITIES

AUDITOR COMPETENCY

AUDIT FAILURES AND AUDIT QUALITY

PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

AUDIT COMMITTEE OVERSIGHT OF EXTERNAL AUDITORS

AUDITOR INDEPENDENCE

CONSOLIDATION AND COMPETITION IN PUBLIC ACCOUNTING FIRMS

INTEGRATED AUDIT APPROACH

AUDIT OF DEFINED BENEFIT PENSIONS

AUDITOR LIABILITY LIMITATION AGREEMENTS

SUMMARY

KEY TERMS

REVIEW QUESTIONS

DISCUSSION QUESTIONS

NOTES

INTRODUCTION

External auditors are responsible for auditing the company's financial statements and providing reasonable assurance that they are presented fairly and in conformity with GAAP and that they reflect true representation of the company's financial position and results of operations. Auditors are also required to express an opinion on the effectiveness of the design and operation of ICFR. The external audit function is intended to lend credibility to financial reports and reduce information risk that financial reports are biased, misleading, inaccurate, incomplete, and contain material misstatements that were not prevented or detected by the ICFR system.

Primary Objectives

The primary objectives of this chapter are to

• Recognize the role independent auditors play in achieving effective corporate governance and reliable financial reports.
• Understand the history of auditing, the traditional roles of auditors, and regulations recently placed on them.