A study examining the pros and cons of adopting auditors within a company Essay

There is increasing demand from little company about freedom from audit on their fiscal statement. Indeed, some of the states such as Singapore, Australia and UK have exempted little company from audit. However, in Malaysia, audit still is a mandatory statutory demand for all the companies ‘ careless size. In this study, we have conducted an interview of two companies, Panasonic Malaysia Sdn. Bhd. and Syarikat Perniagaan Lam Zhuan Sdn. Bhd. The Panasonic is the electronic and electrical industry, while the Syarikat Perniagaan Lam Zhuan Sdn. Bhd. is the plaything and nutrients industry. We had set a set of questionnaires to interview the director and managers of the companies severally. The aims of the interview that we conducted are based on the issues such as necessity to name hearers for the company, every bit good as the pros and cons to follow the hearers within the company. Besides that, we besides analysis the companies ‘ outlook on value added services from professional accounting houses.

An hearer is an outside comptroller that occupied by the board in order to reexamine the fiscal statements. The chief intent of hearer is to reviewer on the accurateness of the fiscal statements. Besides that, the hearers are normally analyzing some of the usual traffics or dealing every bit good as analysis internal controls, accounting processs, and fiscal coverage systems. An audit offered to supply a topographic point cheque on the fiscal information and to vouch the truth of the fiscal statements that are free from material misstatement. An hearers are able to help the company in guaranting that the organisation is run efficaciously. Besides that, it besides makes certain that the community records of the company are kept accurately and revenue enhancements was paid suitably on clip.

Nowadays, there have two types of audits which are internal audit and external audit. The internal audits are similar to external audits because they are analysis the procedures and operations which use by a company to fix the fiscal statements ( eHow, 2010 ) . Furthermore, the internal hearers are employed by the organisation as an employee while external hearers are independent. Internal hearer is confer withing an organisation on the manner to develop and make their ends. Furthermore, internal hearer are largely focus on measure the concern procedures and give recommend to the organisation. Some of the hearer can prosecute the internal control subjects which are the dependability of fiscal statement, fraud sensing, or understanding of Torahs and ordinances ( BusinessKnowledgeSource, 2010 ) . On the other manus, the external hearers are largely focus on the fiscal statement whether there have misdirecting. The external hearers are necessary to give assurance to their investors, regulators and the populace. The hearers ‘ sentiment is representations in the fiscal statements must true and non misdirect ( eHow, 2010 ) .

The advantages of internal hearers can assist in validate the effectivity of their organisation ‘s internal controls and look into for misstatements that might happen such as waste, or fraud. The responsibility of the internal hearers is to look into and measure the fiscal information, information systems, processs, and internal controls in order to guarantee the history is right and accuracy being recorded. The internal hearer can supply a proper accounting system to the company for determination devising. In order to make the aim, the company should hold an internal audit to well manage their concern is efficaciously. Besides, internal audit provide an orderly agreement of forces, procedure and scheme to the company to accomplish a positive result. An hearers can analyse that the failings of the company and supply sentiment every bit good as recommendation to better the company public presentation. Harmonizing to Business Knowledge Source stated that the direction can better their company public presentation through the study that provided by the internal audits to accomplish better consequence. Besides that, they besides mentioned the internal audits are utile in control over the concern activities. Through an internal audit, the company can acquire rid of complexness and uncertainness that might happen and look frontward to hold a solution to verify the jobs ( BusinessKnowledgeSource, 2010 ) . Internal audits can assist in eliminated or cut down the chance of the mistake or fraud that occur within the company. Furthermore, the company intend to use internal hearers in order to supply them a topographic point cheque on their employees and besides history, hence, this will cut down the opportunity of fraud go oning. Therefore, appoint internal hearer can do the company to hold a smoothly concern operation.

However, there are some disadvantages to the internal hearers. First, sometimes the internal hearer can neglect to look into the planned frauds. Since the direction of the organisation are playing many fast ones in order to command the histories and to conceal the inefficiencies. Besides that frauds will non uncover and the audited histories will non invariably show the true and just image. There is a room for fraud, if the direction provides the false information. Therefore, sometimes the internal hearer will give an unwanted consequence to their organisation. Another disadvantages to the internal hearer, they can neglect to unwrap the accurate information of what is go oning to the organisation. The background of entry may non be wholly clear to internal hearer and direction may be ill-defined on their elucidations. An hearer has to give the audit study to the company whether these things has happen or non. Last, the internal hearer does n’t ever demo the true position. Since the rule of internal hearer ‘s is fails, they do n’t see the existent concern personal businesss and the image of the audit is changed ( BusinessKnowledgeSource, 2010 ) .

Before an organisation pick an external hearer, they must hold selective processs to make up one’s mind which accounting house is right for them. There are some factors to assist them to pick it which are the size of the house, the scope of the occupation, the legal demand of the house and the fiscal program obtainable an external hearer. The organisation can engage the “ Large Four ” accounting house to scrutinize their fiscal statement. Furthermore, there are some advantages and disadvantage of holding an external hearer in the organisation. The first advantage of holding an external hearer is the short-run benefits. The organisation may see instant benefits from holding an external hearer, the primary benefit being that any process or operational inadequacy the hearer finds can be quickly to rectify or better. Besides that, many houses rely on their financials to cipher the revenue enhancement filings which would be inaccurate because of the faulty statements whereby the consequence in the revenue enhancement punishments and involvement. The following advantage of holding an external hearer is the long-run benefits. The external hearer can vouch the direction and board of manager in the organisation. Besides that, the accounting controls and process used are helpful and heighten the assurance in the organisation with investors, regulators and the general populace ( eHow, 2010 ) .

Conversely, the chief disadvantages of external hearers are that the external hearers can be expensive. Therefore, the company must be after their budget suitably and decently in order to guarantee that they are non over budget. However, in some fortunes, the company have to confront the fuss of altering the external hearer because the hearer will be require to alter annually or after a period of clip ( QFinance, 2009 ) . Furthermore, external hearer focal point countries are much narrower because they concerned merely on the fiscal facets of the organisation. However, the observation and the operation capable or issues are non in the responsible of the external audit. Apart from that, the external audits many accidentally fall short in accurately adjust the sentiment or mentality on the fiscal stamens that are misstated. In other words, no affair that the external hearer execute their occupation harmonizing to the by and large accepted auditing criterions ( GAAS ) , the stuff misstatement that exist in the fiscal statement might be non detected, so this caused the external hearer offer incorrect or inappropriate sentiment an recommendation to the company ( Colbert, 1995 ) .