A Summary of the International Standards on Auditing

International auditing standards help professionals review corporate processes overseas.

International auditing standards help audit professionals review the internal controls, processes and policies of global companies. These standards also help auditors review operating processes in accordance with generally accepted auditing standards.

Auditing Defined

Auditing is a business method that allows an external examiner to ensure that internal controls are adequate and functional. Senior corporate leaders establish controls to prevent losses in operations. A control is a set of guidelines that instructs on task performance and problem reporting.

Importance of International Auditing Standards

In modern economies, business activities become increasingly global in scope. As such, the need for audit standard harmonization is crucial. International auditing standards are important because they help auditors apply the same procedures to all organizations across the globe.

Client Agreement

An auditor discusses the audit program with the client before starting fieldwork. Auditing standards require an audit professional to agree the terms of the engagement with senior management or department heads.

Control Tests

An auditor tests internal controls to ensure they are adequate and functional. A control is adequate if it provides clear instructions on employee responsibilities. A functional control provides appropriate remedies for internal problems.

Risk Assessment

After testing controls, an auditor rates risks and controls as "high," "medium" and "low," depending on the loss expectation. "High" and "medium" risks may cause a firm significant operating losses.

Report Issuance

An auditor reviews major risks and control problems before issuing a report. The auditor discusses mitigation plans with senior management and ensures that such plans are adequate with respect to the risks.

References

• The World Bank: Implementation of International Accounting and Auditing Standards
• International Federation of Accountants: IAASB Clarity Center