Know The Real Role Of Auditor In the Company’s Business
An Auditor is entrusted with the duty of verifying the presence of the business assets of a company. For doing this, he needs to determine the asset as per specified on the date of the balance sheet. Before this procedure, the proprietors should initially check with the detailed list of their assets and see that if it relies on the basic accounting principles.
Even though the Auditor himself does not require to value the asset, he must apply his tactical skills and intelligence to see that the full review book placed by the company is in the fair and correct state. Usually, qualified professionals like valuers and surveyors are entrusted with the responsibility of asset valuation. In fact, the Auditor can depend on the certificate issued by them and proceeding, he must surely disclose this matter in his report.
Although the Auditor himself is not the valuer, he may be liable for the incorrect valuation of assets. Action can be taken against him on account of negligence. Further, the Auditor should carefully check with the profit and loss account because there can be third parties who take their decisions depending on the audited balance sheet.
An Auditor’s part in verifying the liabilities
It is really important to inquire about the nature and period of existence of liabilities within the company books.
So, an Auditor need to
- Ensure if all the liabilities are clearly noted in the corresponding pages of the balance sheet.
- Further, he must see if these liabilities are connected with the business itself and also, whether these are stated correctly and is authorized by the executive board of the organization.
- Analyze if the liability account is presented in the balance sheet at their true figure value or not.
The main objective of liability verification is to determine whether there exist any kind of manipulation on the accounts like inflating or deflating the profit records of the concern. In addition, it is advisable that the Auditor should get a certificate from the business management marking that all the liabilities and their nature are clearly stated in the record book along with the content of contingent liabilities if any. At times, the organization includes false records relating to profits and loss to show that their business position is stronger and stable than what actually the condition is. Thus, they build up a secret reserve. An Auditor should never allow such actions.