Topics: Auditing, Audit, External auditor Pages: 4 (1101 words) Published: November 30, 2013

Generally, the role of an auditor as an independent person who is appointed to investigate the organization, its records, and the financial statements prepared from them, and thus form an opinion on the accuracy and correctness of the statements (Millichamp, 2002) is understood by everyone. But sometimes the conduct and independence of auditors are questionable as there are cases showing that the behavior of auditors are deviated from their profession where the auditors care about their own benefit. Therefore, audit committees are needed. Audit committees consists of non-executive directors who responsible for all matters relating to appointment, resignation and removal of auditors. The committees make a great impact on the conduct of audit and the independence of external auditor.


According to Loebbecke and Arens, 1996, they said that audit report is used to inform users what the auditor did and the conclusions reached. According to Millichamp, 2002, he said that most auditors’ reports are positive and end with a statement expressing the auditors’ opinion that the financial statements show a true and fair view and comply with statutory requirements. Audit report is important for shareholders and stakeholders of the company so that the audit report must have professional standard quality. Audit committees can be said as the representative of shareholders and stakeholders. Therefore, the directors and auditors did not have contractual relationship, it can prove that the audit report is shown as true and fair view and also can help to increase the confidence of shareholders and stakeholders to the audit report. Audit committees also can disclose the financial statements to the shareholders and stakeholders with audit report prepared by auditor. Conduct of audit that includes accounting systems, internal controls, audit testing, analytical review techniques, working paper, reports to directors or management and the...

References: Arens, A. A., and Loebbecke, J. K., 1996, “Auditing – An Integrated Approach”, 6th Edition, Singapore, Prentice-Hall, Inc.
Millichamp, A., 2002, “Auditing”, 8th Edition, United Kingdom, Thomson Learning.
Watne, D. A., and Turney, P. B. B., 1990, “Auditing EDP Systems”, 2nd Edition, United State, Prentice-Hall, Inc.
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