Role of The Auditor In Free Market Economy.Today, enterprises with various organizational and legal forms and various forms of ownership have the opportunity to independently organize the production and sale of any product, choose a wage system that suits them, methods of tax and accounting, and much more. But one should not think that the state does not exercise control over all these enterprises. Financial and economic control and statutory audits are important in such a situation.
It is customary to understand an audit as an independent audit of an enterprise to express the reliability of its accounting and financial statements. Due to the fact that audit as a type of practical activity is an integral part of the market economy of any state, it is audit activity that plays an important role in the financial control system and conditions of a market economy.
The role of audit in the economy is so important that without it it is almost impossible to make the right decisions that will allow you to effectively conduct business in the future. In a word, a timely audit will allow you to objectively assess the activities of the enterprise and develop the necessary action plan for its further successful development.
Audit performs several important functions at once: expert, analytical, managerial, advisory, production and informational. Thanks to all these functions, audit, which plays the most important function in the economy, will help not only improve the financial condition of any enterprise, but also avoid various risks arising from distortion of accounting documents.
If your organization is subject to statutory audit, or you just want to get reliable information about the financial condition of your organization, then you need to resort to the help of auditors. Finding a company that provides quality audit services is not easy – this job requires special care and competence.
Auditing in Western theory and practice is considered to be a process by which an independent worker accumulates and evaluates information in order to determine and express in his opinion the degree to which this information meets the established criteria. The basis of audit control is the mutual interest of the state, the administration of enterprises and their owners in the reliability of accounting and reporting. The need for independent financial control in the planned economy did not arise in Russia. It was replaced by an audit aimed at identifying violations and abuses in the financial and economic activities of enterprises, errors and deviations in reporting The need to adopt a large number of new regulatory documents for accounting and reporting, taxation and the procedure for the formation of production costs associated with the development of market relations. In this regard, there were the first violations related to the economic activities of the enterprise associated with non-compliance with the requirements of regulatory documents
Audits are required: government agencies, courts, prosecutors and investigators to confirm the financial statements they are interested in.
The audit is much broader than the audit, because it includes not only the verification of the reliability of financial indicators, but also participates in the development of assumptions to improve the economic performance of enterprises. The main purpose of auditing is to establish the reliability of accounting or financial statements of economic entities and their compliance with regulatory documents when conducting business in the Russian Federation.
Auditor (from Lat. Auditor – listener) – a trusted person who carries out an audit, checks financial and economic activities. The auditors can be qualified specialists, professionals who have a special license or who are employees of audit services, firms.
Special audit firms are created to conduct an audit. They receive special rights to conduct audit activities. Auditors act not only as auditors, but also as analysts-consultants. Services provided by audit firms are paid and provided on a commercial basis.
Auditing as a practice is a type of entrepreneurial activity that plays an important role in a market economy. The functions carried out by the audit include: expert, analytical, advisory and production.
The expertise includes: checking the public financial statements of an economic entity and then giving the customer his opinion; expressing one’s own opinion about how reliable its data are and reflect the actual financial condition; accounting is maintained in accordance with applicable laws and regulations. When checking the reporting, its individual forms are studied, for example, the balance sheet, the validity of the reporting indicators, confirmed by the entries in the accounting accounts, is determined. A very important function of the auditor is the analytical function.
The auditor, if he is truly interested in continuing business contacts with the client, is obliged to analyze the financial statements and financial forecasts, and develop appropriate recommendations. He draws conclusions not only about the financial condition of the enterprise at the date of the completion of the audit, but also about the prospects for the development of this enterprise in the near future, and possibly for more distant periods. The auditor is obliged to acquaint the management of the enterprise with them, in turn, listen to his assessments of the financial condition and development prospects, correct his conclusions, if necessary, and state them in writing with detailed recommendations aimed at improving the activities of the client enterprise. Typically, such recommendations are made in an audit report.
But, unfortunately, such an analysis has not become an ordinary, very important and even necessary addition to the conducted audits. The reason is the same: the lack of social order of the urgent need of management for accurate knowledge of the financial condition of the enterprise and the prospects for its development. The situation is different in countries with developed market economies.
The audit activity, as evidenced by experts who know foreign experience, is based on a wide range of techniques and methods of economic analysis.
One of the main functions of audit is advisory, which in countries with market economies is advanced to the first place. There, it is not the verification of the reliability of the reporting that is brought to the fore, but the provision of consulting services on various issues. These include services for: taxation, accounting issues; drafting various declarations, legal issues, organizational issues, technical issues, economic issues and even environmental issues.
Consulting assistance provided in a timely manner will help to avoid shortcomings in accounting and errors in reporting. An audit of the annual report with the drawing up of an opinion on it for individual enterprises is mandatory, for example, joint stock companies, commercial banks and joint ventures, but a one-time procedure. Ongoing consulting is carried out by auditors throughout the year, which makes it possible for the client enterprise to hedge against possible shortcomings in advance, and therefore draw up reports that meet all regulatory documents.
Therefore, consulting should be seen as a promising audit function that provides practical advice and assistance. Foreign experience in auditing shows that the examination of the balance sheet and financial statements accounts for slightly more than half of its total volume, and the remaining work falls on consulting services.
In connection with the transition to a market economy, it is necessary to significantly improve the consulting system, expanding it and increasing the efficiency. At this stage it is advisable to do this by:
– creation of joint consulting firms, which, along with consulting work, would train professional consultants;
– reorganization of the entire system of vocational training and retraining with the allocation of promising specialties, including accounting and audit;
– attracting experts and consultants from Western firms.
The audit directly performs the production function. Auditing organizations or individual auditors on a contractual and paid basis directly perform the duties of an accountant: they establish accounting, introduce its advanced forms and methods; prepare reports and income statements; constantly keep records and prepare reports. When performing this function, verification and confirmation of the reliability of the reports should be carried out by other independent audit organizations or private auditors.
The role of audit in the economy is so important that without it it is almost impossible to make the right decisions that will allow you to effectively conduct business in the future. A timely audit will allow you to objectively assess the activities of the enterprise and develop the necessary action plan for its further successful development.