The Auditing Process – Now and the Way Forward


By John Seeram


There has been much writing and talk in the media and elsewhere on the performance of organizations in both the public and private sectors as it relates to transparency and accountability. Decisions on those two performance indicators are dependent, among others, on the auditing process.


Auditing is a process

Auditing is an ongoing activity rather than a static one-time check of the relationship between financial assertions and underlying events. This ongoing process requires the recording and analyzing of data as financial activities and events occur, and decision made thereon upon the communication of the results.



John Seeram

The larger benefit of auditing derives from the increased credibility of financial assertions that result when the outcome of the audit process is communicated to stakeholders, and who may reply on those assertions. This communication is called attestation. It is the primary function of the audit process, and it usually takes the form of a report.

The audit process focusses on the assertions, invariably financial, and on how well they represent events that have occurred. Judgements are left to the users of the audit information, and who are given assurance by the audit process that this information fairly represents what really happened.


Types of Auditors

Individuals or groups who perform the audit function comprised two groups – Independent Auditors and Internal Auditors.


Independent Auditors

The primary activity performed by Independent/ External Auditors is the examination of the     financial statements prepared by the client. The objective of this examination is the expression of an     opinion on the fairness with which the financial position, the results of operations, and the cash flow     position are in conformity with International Financial Reporting Standards.


2) Internal Auditors

Internal Auditors who are also independent, are employees of an organization, and are concerned

with determining whether organizational policies and procedures have been carried out and with      regards to safeguarding its assets. They also review the efficiency and effectiveness of operating      procedures as they relate to risk management, control, and governance processes, and assess the      reliability of data generated within the organization. The Management and the Board of      Directors/Audit Committee are the most immediate users of the work of Internal Auditors.


Work of the Auditors

The audit process requires that the work of the internal auditor complement that of the external auditor. Since the internal auditor has a major role to play in attaining the goals of an organization, the emphasis in this presentation will be on the internal auditing process.

The practice of this profession is guided by the pronouncements of the Institute of Internal Auditors (IIA) Global of which the IIA Guyana is a Registered Chapter with this global body.


The Practice in Guyana

Internal auditing Units/Departments can be found in many organizations both in the private, public and governmental sectors. It can be said that management and the board, etc. see the need for the practice of internal auditing, hence their existence. The ultimate goal of this unit is to determine if the goals have been met and to communicate those results to management, audit committee and to the Board of Directors.

In order to complement the work of the external auditor, it is expected that the internal auditor will produce work to the required standard. It is the view that more needs to be done when we look at issues to be addressed in meeting with the guidelines as pronounced by the Global IIA.


Some of the major issues are

1)  Most internal auditors are not familiar with the IIA’s International Professional Practices Framework (IPPF). Included in that IPPF are, among others, the Code of Ethics, the International Standards and Practice Advisories of which the audit reports have not been complying fully with the IPPF.

2)  Training as it relates to professional development is not that intensive, work related, and a priority,   and this can be attributed to auditors not being familiar with the IPPF.

3)  To go with training, is the limited funds being allocated in the training budget of organizations  especially for intensive training on the job. In order for auditors to enhance their knowledge, skills  and competencies, adequate funds are required to be allocated for the professional development of  auditors.

4)  Membership of this body here in Guyana needs to be increased, hence access to the developments and practice of this profession as released by the IIA Global is denied to practising auditors.

5)  Internal auditors tend to pursue certification in accounting (ACCA) rather than in auditing. The IIA administers the Certified Internal Auditor’s (CIA) examination which incidentally is not widely advertised by the Guyana Chapter.

6)  Management and its Audit Committee/Board are not fully supportive of the existence of internal auditing in their organization, since it knows that it has to engage an external auditor who will give an opinion on the financial statements, hence the emphasis is in that direction.

7)  The quality of reports is not meeting the standards as laid out in the IPPF. The goal of any audit is  not to demonstrate just how bad things are, but to encourage positive action in support of the  organization’s goals. Internal auditors can benefit from reviewing a key foundational concept in audit report writing, informally referred to as the Five C’s:


  • Condition (what is)
  • Criteria (what should be)
  • Cause (why)
  • Consequence (so what)
  • Corrective action plans and recommendations

(what’s to be done).


Well written audit reports provide recommendations that address the underlying root causes of a  problem, thereby helping to ensure that the condition will not recur.

8)  The information technology (IT) landscape is changing at such speed that most of us have trouble   trying to keep up. As soon as you master a newly launched technology, there is another one on the horizon. Internal auditors are not fully equipped to handle the technology in the operations of their  organizations. It should however be mentioned that auditors with IT experience are still in high  demand, yet they continue to be hard to find, to remunerate, and to be retained.

9)  This audit Unit is part of the organization’s management structure and normally reports to an Audit Committee and/or its Board of Directors, to maintain its independence. In practice this has not always been so, however efforts are in train to comply with IIA Global’s pronouncement.


Fixing the problems

Having identified multiple root causes, management and the board need to address these issues in developing this profession with some degree of urgency. Also, it is imperative the internal auditors seek membership of the IIA Global to qualify for the benefits IIA has to offer to its members. Some organizations in support of its auditors have paid for group membership. There is a dire need for more group memberships.

The Guyana Chapter has been doing its part, among others, in encouraging membership, for auditors to do CIA examination, and to participate in their professional development by having Seminars/Workshops. Also, talking to management on being more supportive to internal auditors and to observe their independence.


Concluding remarks

The practice of internal auditing is a ‘must’ and is required to complement the work of the external auditor in order to complete the auditing process.

Although some organizations are serious with the development and practice of internal auditing, there are others which have to address their shortcomings. There is the need for those organizations to focus on their shortcomings so that the internal auditing profession can develop, comply and practice the International Standards of the Global IIA in the not too distant future. Sharpening this focus will lead to improved transparency, accountability, recognition, and ultimately adding value to the organization.


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