External Auditing Essay Example | Topics and Well Written Essays - 4000 words

External Auditing - Essay Example External auditors have played an important role in organisation. Even in corporation which have been spending a lot of money in their internal auditing system, some have been found to be seeking for the service of external auditors. Therefore there is a question that is being raised on this emerging trend in auditing and the role that is being played by the external auditors in corporate governance. This trend of seeking the service of external auditors has grown to be an issue in corporate governance stemming from the understanding of trust that shareholders have on the board and the auditing system of the organization. In many instances, it is the board which is trusted with the everyday running of the organization and therefore it is expected that this board should be trusted even with the results of the internal auditors. But the recent trend in corporate governance has shown that there is an increased preference of external auditors as the main auditor for corporation and the internal auditors have been reduced to plying the second role in helping the external auditors in their work. ... But is has also been realized that the use of the two system helps to ensure transparency in the auditing system and probably breaks a corruption chain that could be running in the corporation. 1.3 Why is it an issue now In the recent past, corporate governance has become a yardstick in attracting investors in a corporation. With the increased openness in running of corporations corporate governance is the most important aspect which determines how the shareholders have a say in the running of the organisation. The increasing globalisation is opening investment chances in the whole world and this has prompted increased need for openness in running of the corporations. This may be the main reason why organisation have preferred to use the services of external audits in order to show the degree of openness in the running of the organisation and therefore increase the chance of attracting more investors into the organization. 1.4 What could this research shed light on This research could give important information of the importance of using the service of the external auditors and the internal auditors in order to increase the level of transparency in the running of the organization. The research will shed light on the increased role that is being played by external auditors in corporate governance. Therefore it could explain the reason for increased preference of the service of external auditors in organizations. 2. Background The published financial statements have become an important tool for investors to make decision whether they are going to invest in an organization or not. The published financial statements are not only important to investors but also to creditors and other stakeholders who are interested in a corporation. They are important as