External Auditors and Fraud Examiners Essay Example | Topics and Well Written Essays - 3500 words

External Auditors and Fraud Examiners - Essay Example This paper illustrates that an external auditor is so called as to distinguish him from an internal auditor who is an in-house professional. While the internal auditor is a paid employee of the entity, the external auditor is an independent professional engaged by the entity for a fee and as required by Companies Act.   To be more specific, an external auditor gives his opinion as to whether financial statements are materially correct. He is deemed independent as he has no special relationship and pecuniary interest in the client that might possibly encourage him to ignore adverse facts and evidence of the client the auditor evaluates. Thus, to be independent, the auditor cannot both work under the client as well as act as the client’s external auditor. The external auditor also carries out compliance, operational and forensic audits. Forensic auditing is a special purpose audit to unearth financial frauds and other crimes. Forensic as its meaning (i.e. of the law) suggests, forensic auditors, detect information for being used as litigation support. If the forensic auditor is a CA or CPA, his evidence at trial would lend more credibility although it is not mandatory for a forensic auditor to have a CPA license in the U.S. The external auditor in the process of his auditing activity concludes whether the assertions made in the financial statements are true and fair. The assertions are in the nature of how the business is conducted that is how its business generates income and spends it, how it manages its inventory, how it records information about its property, plant, equipment, its long-term liabilities, equity, cash, and investments. Although forensic auditing and fraud examining are interchangeably used, both are different disciplines. While forensic accounting involves the application of professional accounting skills in a civil or criminal litigation. Thus, most of the fraud examinations are part of forensic accounting, but every forensic accostin g is a fraud examination. For example, an expert may be said to be engaged in forensic accounting while the furnishing value of a property to the court which need not involve any fraud unlike in the case of fraud examination.