External Auditors: An Ally or Opponent?

Unfortunately, the finance departments of many companies mistakenly believe that having an external audit annually is part of their internal control structure they can rely on to ensure their financial statements are accurate and their internal controls are sound.

While the objective of an external audit is to determine whether a company’s financial statements are fairly presented and free of material misstatement and during the process of the audit, the external auditor considers the internal controls relevant the financial statements, most external audit opinions make it very clear that the audit is not being conducted “for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls” Most external auditors will report to the company in the standard language of  NGAAP or IFRS opinions.

The primary role of an external auditor appears to be clear and simple: to express an opinion on whether an entities financial statement are free of material misstatements. But the role of an external auditor does not end there, He is an ad visor, a sounding board, a provider of services, a confidant, and he can be an ally of an opponent. The expectations of the supervisory board towards the external auditor differ from those of management . The first is looking for a partner independent of management, the other for a partner who helps them stay in control.