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Hi there. It's really been quite a while since I last posted, & I think I'd probably be doing it more often now. As most of you should already know, I've worked in the audit line for 6 years & it's definitely amazing. In this post, I'd like to share some insights of the professional so you may widen your horizon of knowledge & widen your options for a career path.

Most of you would already know, that there are the Big 4 + 2 firms in the audit practice. They are ranked as below (you may click on the URL below the image for a link to the website).

Kindly do note, that all these firms are international networks of practice which operate in the view of profits as separate entities in their own countries (e.g. US, UK, Malaysia).

Our work, as auditors (a.k.a. assurance providers) is with regard to the Financial Statements which comprise of the :

  1. Directors' Report
  2. Balance Sheet (a.k.a. Statement of Financial Position)
  3. Income Statement (a.k.a. Statement of Comprehensive Income)
  4. Cash Flow Statement (a.k.a. Statement of Cash Flows)
  5. Statement of Changes in Equity
  6. Notes to the Accounts

Our role is to ensure that the Financial Statements (subject matter) are properly drawn up in accordance with the relevant reporting standards (e.g. MFRS, IFRS). We have to ensure that the accounts show a true & fair view of the company.

True in this context, is referring to without fraud & factual.
Fair refers to the unbiased condition of the subject matter.

Our duty as auditors is to form an audit opinion of the company's financial statements based on the above and prepare an audit report. You may view financial statements and audit reports of various listed companies at their respective websites (look for investor information) or in the relevant stock exchange websites (e.g. Bursa Malaysia).

An example of what we do, referring to the Balance Sheet on Cash at Bank balances. Let's say, the amount of Fixed Deposits is RM668 ($160)m, we shall have to confirm this amount. But how?
  1. Sight and agree the amount to the bank statement.
  2. If figure agrees, send a bank letter to the bank.
  3. Receive the bank confirmation, & ensure amount is true & fair.
  4. Ensure proper disclosure of security placed for this amount is performed.
By taking these steps, the amount is definitely true & fair and therefore shows a clear view of the company's performance. Do note though, that our work is based on materiality, a concept developed for efficiency. Our work depends on the size of the client.

If the Profit before Tax figure is small, more work shall have to be done as a small Net Profit margin would mean that the shareholders would require more assurance of the figures, as a loss-making company is completely different than if compared to a moneymaking one.

Then, comes the quality control process where reviewing and leadership come to play. Here's positioning by ranking in a firm :
  1. Managing Partner / Chairman
  2. Partner
  3. Director
  4. Principal
  5. Senior Manager
  6. Manager
  7. Assistant Manager
  8. Supervisor
  9. Senior Associate
  10. Associate
  11. Junior Associate (Assistant)
Internal auditors are different than compared to external auditors. They work for company's with the NEDs (non-executive directors), ensuring internal controls are operating effectively. Paychecks are paid by the company itself and therefore an independence threat is apparent.

Hope you found this helpful. Happy auditing!

This article has been featured on ProspectsASEAN.com with permission.


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Roshann Mathiahlagan said...

Glad it helped.

Daniel Milstein said...

That is so true. As an author and business man, I can relate to how you said "If the Profit before Tax figure is small, more work shall have to be done as a small Net Profit margin would mean that the shareholders would require more assurance of the figures, as a loss making company is completely different than if compared to a money making one". I hope more people discover your blog because you really know what you're talking about. Can't wait to read more from you!

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