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«DO WE NEED INTERNAL AUDIT, FINANCIAL AUDIT OR COACHING? PETRAȘCU Daniela1 “Lucian Blaga” University, Sibiu Abstract The present paper does not ...»

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Revista Economică 66:5 (2014)

DO WE NEED INTERNAL AUDIT, FINANCIAL AUDIT OR

COACHING?

PETRAȘCU Daniela1

“Lucian Blaga” University, Sibiu

Abstract

The present paper does not wish to be merely a brief parallel between the

financial audit and the internal audit, but it aims at pointing out their importance for

any economic entity, especially the importance of the benefits it can offer both to the

current management and to coaching. Starting from the premise that audit is not a control and that auditors are not the adversaries of an entity, the aim is to show that the scope of audit missions should concretize in added value.

Keywords: internal audit, financial audit, coaching, fiscal audit The research methodology to which I appealed in creating the present paper consisted of the analysis and systematization of the specialized literature and that of the national and international norms which regulate the auditing activity.

In view of accomplishing the aforementioned objective, I used as main method of research, the following: qualitative analysis, within which the method of comparison can be found, a method which views the drawing of a parallel between the forms of audit; synthesis: found in drawing the conclusions which regard the explanation and the appreciation of the acknowledged situation, the limits and the characteristics of audit, respectively, and, last but not least, the documentation, as a theoretical method of research within which I comprised the analysis of the norms issued on a national and international level, regarding the auditing activity, as well as the Assistant Professor, PhD.

Revista Economică 66:5 (2014) analysis of the works published in the field by various internationally renowned authors.

Internal audit The audit, in general, is a systematic process of objective acquirement and evaluation of some pieces of information or affirmations regarding the assessment of their degree of conformity with the pre-established criteria, as well as a process of communication of results to the interested users (American Accounting Asociatim).

The audit consists of verifying and certifying of the financial situations by and independent expert in view of expressing an opinion regarding the reality and exactness of the data contained therein. The role of the audit is to ensure the users of information in what regards respecting the accounting principles and practices, as well as informing them about the presentation in accounting and in financial statements of a clear, complete and real image of the financial position and performances of the company.

(Giurgiu A, Ungureanu P., Duma F., 2009, p. 28.).

From the analysis of the definitions given to the audit, in general we

can assume the following traits:

1. The audit is a process, a set of operations, of collecting, analysis and evaluation of the information (audit evidence) in view of acquiring an assurance regarding the conformity or non-conformity of these pieces of information or of the declarations with pre-established criteria.

In essence, an auditing process consists of: collecting the just and plenty of audit evidence necessary for expressing an opinion or for formulating a recommendation; the evaluation of the accordance or disagreement between the different types of collected evidence; establishing the obliquity from the pre-established norms. (Petrascu D, 2012, p.8).

2. The audit confronts the applied accounting policies and the utilized work procedures within the entity with a set of pre-established criteria, such as The International Financial Reporting Standards (IFRS), the International Accounting Standards (IAS), the national accounting regulations, the manuals of internal procedures, fiscal regulations, etc. In order for them to be useful, these confrontations must be based on verifiable and justifiable information.

3. The auditors are competent professionals who have obtained this quality based on certain exams. The examination of the information is not done randomly, according to the auditors’ intuition, but by professional Revista Economică 66:5 (2014) standards (ethical conduct established through Codes of Profession and through the VII-th Directive of the CCE from 1984, professional standards and work standards).

The conclusions of the auditors are synthetized and systematized in the rapports which are made available to those who are interested. (Oprean I., Popa I., Lenghe R.l,, 2007, pp 97-98.). In the year 1999, The International Institute of Internal Auditors (IIA) from USA issued a new definition of internal audit, following a study conducted with the help of 800 students, coordinated by the auditors from the Australian universities, like this: (Ghiţă M., Popescu M., 2006, p.35) the internal audit examines the entity’s activities and services, first of all, in order to improve them. He leads to the strict application of the policies and procedures instituted by the respective entity and is not limited to the financial aspects.(Jinga C., 2009, p. 54).

The internal audit constitutes a function of the control structure of the entity. It must not be confused with the entity’s internal control structure.

The two departments are distinct and independent, and are not in a relation of subordination (Jinga C., 2009, p. 54). The internal auditors are permanent employees of the company and are subordinated directly to the company’s management or to the General Assembly of Shareholders. The possibility of calling upon the services offered in this field by specialized companies (expert accountants, financial auditors) through the conclusion of service contracts is not excluded.





The internal auditor counsels, assists, recommends, but does not decide, his obligation being that of representing a means which contributes to the improvement of the control each manager has upon his activities, as well as upon of those who are in coordinating positions, in view of reaching the objectives. (Ghiţă M., et. al, Idem., p. 32). To summarize: the internal audit is a profession which has always been constantly re-defined over the years, from the wish of answering to the ever-changing necessities of the entities, his object of activity shifting from the analysis of the accounting and financial problems to tracking down the main risks of the entities and the evaluation of their internal control. (Jucan N.C., Sibiu, 2011, p. 71).

The financial audit: the simple denomination of “financial audit “can

be used to designate various other missions, such as:

 The financial auditing of the computerized procedures of book keeping;

Revista Economică 66:5 (2014)  The financial audit of the exchange operations in order to verify their presentation according to regulations within the financial statements;

 The financial audit of the accounted social spending in order to verify that the social law is respected.

 The financial audit of the fiscal statements In other words, any kind of analysis, any kind of control, any kind of verification and any kind of study regarding a section or a part of the accounting or the financial statements of an entity may qualify as ‘financial audit’.

This means that the financial audit may be considered as an audit, in general terms, with the exception that the competent and independent specialist must be a professional accountant, and the object of the examination consists of any kind of financial-accounting information.

The financial audit (Government Emergency Ordinance- GEO 75/1999 republished regarding the activity of auditing) consists of collecting evidence regarding the financial statements of a patrimonial entity and the use of the evidence in expressing, by the auditor, of an opinion regarding the conformity of their elaboration, presentation and publication according to an accepted financial reporting system. The objective (ISA 120 “The General Framework for the Preparation And Presentation Of Financial Statements Elaborated By The Committee for the International Accounting Standards”, appendix to the Order no.94/29 January 2001 of Ministry of Public FinancesMPF, published in the Official Monitor no.85/20, February 2001”); the financial audit consists of “expressing, by an auditor, of an opinion, according to which the financial statements have been prepared under all significant aspects, in conformity with a general framework identified by financial reporting”. The expressions used for expressing the auditor’s opinion are: “it gives a true and fair view” or “it presents in a true and fair way under all significant aspects”, terms which are “equivalents” Within the minimal auditing norms elaborated by the Chamber of Financial Auditors of Romania (CFAR) financial statements mean: balance sheet, profit and loss account, statement of changes in equity, cash-flow statements, and the notes to the accounts.

Defining the financial audit The financial audit comprises the annual financial statements, which are exposed to the examination executed by a COMPETENT and Revista Economică 66:5 (2014) INDEPENDENT professional, having the purpose of expressing a justified

opinion regarding:

 The correctness of applying the internal financial-accounting procedures, implemented by the management of the entity;

 The true and fair, clear and complete view of the patrimony, the financial statement and of the results obtained by the entity.

The main characteristics of the financial audit refer to:

The realization of the audit by a professional who is independent from the management of the unit;

It responds to the need of information of various users of information;

It examines periodically the documents, on the basis of a contract, usually concluded for a period of one year;

It analyses the financial-accounting operations, as well the internal financial control unfolded within the audited entity in order to express an opinion regarding the reliability of the financial-accounting documents.

It runs an accessory activity in what regards the discovery and caveat of fraud There are authors who separate the financial-accounting audit from the financial-fiscal audit.

The financial-accounting audit proposes to verify the compliance with the generally accepted conceptual framework of accounting (postulates, principles, norms and rules of assessment), the internal procedures established by the economic agent, as well as realization and certification of the reflection in accounting of the financial statements, of the true and fair, clear and complete view of them throughout the financial year (Stoian A., Ţurlea E., Auditul financiar contabil, Ed. Economică, Bucureşti, 2001. p. 13.).

The fiscal audit consists of the expression of an independent opinion regarding the fiscal activities, competencies, rights and obligations and it has as objective the evaluation of fiscal control, of risks in the field of taxes, fiscal policies and fiscal performance. (Boulescu M., Ghiţă M., Mareş V., Controlul fiscal şi auditul financiar-fiscal, Ed. CECCAR, Bucureşti, 2003, pg. 321-322).

From a judicial standpoint, there is legal audit and contractual audit:

(Creţoiu G., Bucur I., Contabilitate – Fundamentele şi noul cadru juridic, Ed.

C.H. Beck, Bucureşti, 2007, p.320).

Legal audit: represents the auditing mission which has as scope the certification of honesty, regularity and of the true and fair view of annual accounts, as well as the specific verification in what regards the compliance Revista Economică 66:5 (2014) with certain legal dispositions and other information. The notion of true and fair view is connected with the regularity and honesty of accounting. The regularity means the conformity with the rules and the general accounting procedures, depending on the knowledge those who are responsible of the accounts must have about the reality and the importance of the operations, events and statements within the company.

The contractual audit: it is private and un-institutional and it presupposes the establishment of a contract between client and auditor, to who the mission of auditing is proposed. This audit can be limited to auditing certain categories of documents issued by the enterprise (the audit of fiscal documents), auditing a single activity of the enterprise (auditing of sales) or to the auditing of one of the services of the enterprise (cash flow audit).

The analysis of these particularities underlines the existence of a single audit mission or legal control, which comprises the known objectives (certification, verifications, specification), but also a very large number of contractual audit missions. This situation is due to the multiple significations attributed to the term `audit`. Thus, audit can designate any contract concluded between an auditor and a client and it can constitute an activity of control, verification, revision, inspection etc. In these cases, numerous audits may appear in the form of consultation, analysis, evaluation, investigation, diagnostic, etc.(Alain Burlaud, (coord), Francois-Denis Poitrinal, Edouard Salustra, Compatabilite et droit comptable. L`intelligence des compts et leur cadre legal, Gualino editeur, Paris, 1998.) The objectives of financial audit are strongly connected to the information given by the management of the audited entity. In order to be able to draw a conclusion about the correctness and sincerity of the information provided by the management of the entity, the auditor id compelled to gather relevant and sufficient information in order for him to express his opinion regarding the compliance or non-compliance of annual financial statements with the legal regulations in effect.



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