Relationship between external auditor and the organization
External audit resides outside the organization whereby it works independently from the organization. The main purpose of the external audit is the organizational finance. External audit or looks on the risk factors that may affect the organization which mostly are pointed out by the organizational shareholders. External auditor provides information about the annual statutory and tells whether the finance accounts are true according to the company’s account positions. External audit in an organization is responsible in evaluation of the internal controls put in place which may affect the finance of the organization. In addition, external auditor examines and determines the measures put in place to manage the risk factors whether they are functioning as per required. In management of the organizational finance, external auditors are responsible in provision of information about the organizational finance whether fair or true to the position of the organizational finance positions. Eternal auditor is an important body to the organization which works hand in hand with the internal auditor to ensure that the organizational finance are well managed (Smidts, et al. 2007).
In conclusion, the steps that have been incorporated to ensure that the relationship is truly neutral include the use of corporate governance. Corporate governance was created to reduce the risks and scandal faced by the external auditors and organizations. This governance is a concept which is applied by both big and small organizations and is being used in the global world. Corporate governance is truly universal and also relevant where organization is well organized into effective working structures. Corporate governance is concerned with organizational leadership whereby it deals with greed, ego, responsibilities and ethics which might affect the dynamic economy. Corporate governance has increased penalty to those organizations exercising fraud. It has also increased the necessity of the external auditors and given strict responsibilities (Smidts, et al. 2007).
Smidts, A., Pruyn, A. T. H., & Van Riel, C. B. (2007). The impact of employee communication and perceived external prestige on organizational identification. Academy of Management journal, 44(5), 1051-1062.