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Common misconceptions about auditors
Common misconceptions about auditors
The topic is commented on by expert Ilkin Lalayev. Based on the questions raised during audit engagements and our professional experience, we can say that there are several misconceptions about auditors in the business environment. Below, I would like to clarify three of the most common misconceptions.
1. Auditors prepare financial statements and issue opinions on them
In some business entities applying for an audit, we observe that financial statements have not been prepared. Entrepreneurs often think that the auditor will come, prepare these reports, and then audit and issue an opinion on them.
However, it should be understood that an auditor is a professional who reviews whether a company’s financial statements have been prepared in accordance with International Standards on Auditing (ISA) and expresses an opinion based on that review.
Therefore, companies seeking external audit services must have their financial statements prepared in advance so that the auditor can examine them in accordance with the ISAs and issue an opinion.
Usually, audit firms offer financial statement preparation services to business entities. It is important to note, however, that an audit firm or independent auditor who prepares the financial statements cannot audit and issue an opinion on those same statements. In such cases, another audit firm or independent auditor must be engaged.
2. The auditor detects all errors
Some business owners believe that the auditor will review every financial transaction from A to Z and identify all errors. In reality, according to ISA 200, the auditor conducts the audit using a risk-based, sampling approach aimed at detecting material misstatements.
This means that it is practically impossible to verify every single transaction, and the auditor instead selects certain transactions for testing, evaluates the company’s financial statements based on the results, and then expresses an opinion.
Furthermore, under ISA 240, the auditor is not responsible for detecting all errors — only for identifying material misstatements.
3. The auditor only reviews financial statements and issues opinions
According to the Law of the Republic of Azerbaijan “On Audit Services,” audit services include conducting inspections, examinations, and analyses of financial and economic activities on a contractual basis; issuing written opinions; setting up accounting systems; confirming the accuracy of financial indicators; and providing other services in the field of financial and economic relations in accordance with the auditor’s professional competence.
Thus, an auditor is not only a specialist who reviews financial statements and issues opinions, but also a professional who, under a contract with an organization, may perform various types of audits (such as internal or tax audits), establish accounting systems, and prepare financial statements.
The topic is commented on by expert Ilkin Lalayev. Based on the questions raised during audit engagements and our professional experience, we can say that there are several misconceptions about auditors in the business environment. Below, I would like to clarify three of the most common misconceptions.
1. Auditors prepare financial statements and issue opinions on them
In some business entities applying for an audit, we observe that financial statements have not been prepared. Entrepreneurs often think that the auditor will come, prepare these reports, and then audit and issue an opinion on them.
However, it should be understood that an auditor is a professional who reviews whether a company’s financial statements have been prepared in accordance with International Standards on Auditing (ISA) and expresses an opinion based on that review.
Therefore, companies seeking external audit services must have their financial statements prepared in advance so that the auditor can examine them in accordance with the ISAs and issue an opinion.
Usually, audit firms offer financial statement preparation services to business entities. It is important to note, however, that an audit firm or independent auditor who prepares the financial statements cannot audit and issue an opinion on those same statements. In such cases, another audit firm or independent auditor must be engaged.
2. The auditor detects all errors
Some business owners believe that the auditor will review every financial transaction from A to Z and identify all errors. In reality, according to ISA 200, the auditor conducts the audit using a risk-based, sampling approach aimed at detecting material misstatements.
This means that it is practically impossible to verify every single transaction, and the auditor instead selects certain transactions for testing, evaluates the company’s financial statements based on the results, and then expresses an opinion.
Furthermore, under ISA 240, the auditor is not responsible for detecting all errors — only for identifying material misstatements.
3. The auditor only reviews financial statements and issues opinions
According to the Law of the Republic of Azerbaijan “On Audit Services,” audit services include conducting inspections, examinations, and analyses of financial and economic activities on a contractual basis; issuing written opinions; setting up accounting systems; confirming the accuracy of financial indicators; and providing other services in the field of financial and economic relations in accordance with the auditor’s professional competence.
Thus, an auditor is not only a specialist who reviews financial statements and issues opinions, but also a professional who, under a contract with an organization, may perform various types of audits (such as internal or tax audits), establish accounting systems, and prepare financial statements.