Auditing_overview_1_

Auditing_overview_1_ - A100 Auditing Overview You should...

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A100 Auditing Overview – You should read the assigned material to flesh out your knowledge! Stockholders elect the board of directors (the board). The board hires senior management of the company. Management hires internal auditors (paid by the company) to create and manage internal controls . Alternatively, management may hire other companies to install and/or manage internal controls. Internal controls are ~the rules and procedures by which management sees that the company complies with its policies and those of outside regulators (such as the SEC, FASB, IRS, etc.). The board appoints some of its members as the audit committee (a.k.a. supervisory committee). In the most well managed companies, the internal auditors report directly to the audit committee (even though internal auditors are hired and paid by management), or have dual reporting responsibilities to the audit committee and senior management. The audit committee also hires external auditors ( CPAs , hereafter referred to as auditors) . The external auditors are independent, objective, high-integrity, business experts with a huge store of knowledge about internal controls, and in particular, financial reporting requirements of GAAP and other rules and laws imposed by regulators. Auditors evaluate and report on the quality and effectiveness of internal controls and determine whether they result in financial statements that fairly present the company’s performance and position under GAAP (and/or other reporting and compliance rules they are hired to evaluate).
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