Managements responsibilities in an audit

The words, The financial statements are the responsibility of management,

appear prominently in an auditors communications, including the audit report.
Managements responsibility is the underlying foundation on which audits are
conducted. Simply put, without management having responsibility for the
financial statements, the demarcation line that determines the auditors
independence and objectivity regarding the client and the audit engagement
would not be as clear.
It is important for a companys management to understand exactly what an audit
is and what an audit does and does not do. The auditors responsibility is to
express an independent, objective opinion on the financial statements of a
company. This opinion is given in accordance with auditing standards that
require the auditors to plan certain procedures and report on the results of the
audit, while considering the representations, assertions and responsibility of
management for the financial statements.
As one of their required procedures, auditors ask management to communicate
managements responsibility for the financial statements to the auditor in a
representation letter. The auditor concludes the engagement by using those same
words regarding managements responsibility in the first paragraph of the
auditors report.
Auditors cannot require management to do anything or to make any
representation. However, to conclude the audit with the hope of a clean
unqualified opinion issued by the auditor, management has to assume the
responsibility for the financial statements.
Auditing standards are very clear that management has the following
responsibilities fundamental to the conduct of an audit:
1. To prepare and present the financial statements in accordance with an
applicable financial reporting framework, including the design, implementation
and maintenance of internal controls relevant to the preparation and presentation

of financial statements that are free from material misstatements, whether from
error or fraud
2. To provide the auditor with the following information:
All records, documentation and other matters relevant to the preparation and
presentation of the financial statements
Any additional information the auditor may request from management
Unrestricted access to those within the organization if the auditor determines
it necessary to obtain audit evidence objectivity.
It is not uncommon for the auditor to make suggestions about the form and
content of the financial statements, or even assist management by drafting them,
in whole or in part, based on information provided by management. In those
situations, managements responsibility for the financial statements does not
diminish or change.

Audit Objectives
The primary purpose of the audit was to assess the effectiveness and efficiency
of security measures and their compliance with Government Security Policy
(GSP) and Operational Standards. The objectives follow Treasury Boards Audit
of Security and Audit Guide to Information Technology Security and include the
assurances that:
a management control framework exists;
an effective security program is in place;
security education and training is adequate;
information/communications is appropriately classified and protected;
an effective personnel screening program is enforced;
security breaches are dealt with;
physical safeguards are in place for the protection of personnel and assets;
contingency management has been developed;
security requirements are met in contract management; and
threat and risk assessments are conducted on a regular basis and prior to major
system, application and telecommunication changes.
Audit Scope and Approach
The information used in this report was collected through the review of relevant
documents, interviews and visual inspections of security measures on site.
Interviews were also completed with the user community to obtain their
comments and determine their understanding and capability to apply the
security practices and standards in their own environment. The audit team used

the audit questionnaires and audit plan developed during the preliminary survey
phase and reviewed the management control framework related to the security
function. The following elements were audited: Security Management Control
Framework Administrative Security
Physical Security
IT Security
Personnel Security
THE AUDITOR AND MANAGEMENT OF CORPORATIONS
Manasseh (2001) describes the managerial functions that are effected through
the office of the internal auditor. By looking at the key managerial functions that
determine a firms success, they emphasize therelevance of the auditing office
in making sure that there is (1) An effective Organization plan (2) Proper record
keeping (3) Segregation of duties to enhance accountability (4) Authorization
(5) Supervision of work (6) Safe guarding of assets (7) Well organized internal
audit (8) competent staff areemployed (9) proper accounting control Saleemi
and Ajowi (2000) observed that the auditor has two sets of objectives to
accomplish. These they group as;
Primary objectives and
Secondary objectives
Primary objectives of the Auditor In describing the audit objectives,
Saleemi

and

Ajowi

(2000)

explained

that

the

auditor

has

statutoryrequirements to prove the true and fair view or otherwise of the

companys state of affairs, to confirmthat proper books of accounts are kept and
to communicate his findings to the shareholders for effectivedecision making by
the latter. Secondary objectives of the Auditor Saleemi and Ajowi (2000) further
explains that other than the primary objectives, the auditors are required to
perform the following; detect errors and fraud, prevent occurrence of errors and

fraud, assist their clients improve their accounting systems and finding out
whether there are proper systems of internal control in the clients firm.
AUDIT DEMAND
Taylor and Glezen (1985) explain the demand for auditors as being aroused by
the needs of the present and potential investors, and the need for stewardship
accounting. They observed that it is the need of theauditor to provide the
investors with unbiased expert opinion by examining the operations of
thecompany. Hubbard T. D. (1983) observed that there exists conflict of interest
between owners and managers, and that it is the responsibility of the auditor as
a corporate strategist to resolve this conflicts. Taylor and Glezen (1985)
describes the corporate functions of the auditor as to include; (a) Auditing, (b)
Tax advisory services, (c) Management advisory services, and (d) Accounting
services.