external audit
An *audit of *financial statements by independent individuals or organizations. *Robert Khun Mautz has suggested that "the role of external auditing in an advanced economic society can be and has been stated in very simple terms - to add credibility to financial statements" (quoted in Flint, 1988, 6), while *Tom A. Lee has described external auditing as a "technical process to independently *verify and attest the quality of externally reported... financial statements" (1993, 115). Another definition has been offered by the American Accounting Association: "Auditing is a systematic process of objectively obtaining and *evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested parties" (American Accounting Association, 1973). Modern external auditing is the result of almost two centuries of continuous evolution. It emerged as a *professional discipline in the United Kingdom in the nineteenth century, when the creation of limited liability *corporations resulted in separation of the providers of *capital from the managers who administered it. To monitor that investments were appropriately managed and controlled, the external auditing profession offered providers of capital an independent and objective opinion on published financial statements, traditionally the primary record of corporate accountability. As has been suggested, "capitalism is a complicated enterprise, and the system won’t work without referees" (Fox, 2003, 313). The early emphasis of external auditing was on the detection of *errors and *fraud, but it gradually developed into an assessment of the *fair presentation of financial statements. With the establishment of the *American Institute of Certified Public Accountants in 1887, external auditing’s center of gravity shifted from the United Kingdom to the United States, where it has since remained. A notable feature of the external auditing profession is the existence of powerful auditing firms of astonishing longevity. The auditing firms of nineteenth century London included the forerunners of today’s global auditing and accounting firms. Among the names of London auditing firms in 1886 were several that have survived, in various combinations, to the modern era: Price, Waterhouse, and Cooper Brothers (now *PricewaterhouseCoopers) and Deloitte, Dever, Griffiths (now *Deloitte Touche Tohmatsu). See also *agency theory and *internal auditing. Further reading: Flint (1988); Lee (1993); Porter et al. (2003); Power (1997); Schandl (1978); Wolnizer (1987)

Auditor's dictionary. 2014.

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  • external audit — ➔ audit1 * * * external audit UK US noun [C] ► ACCOUNTING an official examination of the accounts of a company or organization by an expert from outside: »He called for an external audit of the society s records. ► LAW an examination of the… …   Financial and business terms

  • external audit — išorės auditas statusas T sritis Gynyba apibrėžtis Organizacijos auditas, atliekamas kviestinio auditoriaus. NATO šias funkcijas atlieka Tarptautinės auditorių valdybos auditoriai. atitikmenys: angl. external audit šaltinis NATO mokymų ir pratybų …   Lithuanian dictionary (lietuvių žodynas)

  • external audit — An audit of an organization carried out by an auditor who is external to, and independent of, the organization. An example would be a statutory audit carried out on behalf of the shareholders of a limited company. Compare: internal audit …   Accounting dictionary

  • external audit — An audit of an organization carried out by an auditor who is external to, and independent of, the organization. An example would be a statutory audit carried out on behalf of the shareholders of a limited company. Compare internal audit …   Big dictionary of business and management

  • external audit — /ɪkˌstɜ:n(ə)l ɔ:dɪt/ noun 1. an audit carried out by an independent auditor (who is not employed by the company) 2. an evaluation of the effectiveness of a company’s public relations carried out by an outside agency …   Dictionary of banking and finance

  • external audit — noun : independent audit …   Useful english dictionary

  • external audit — /ɪk stɜ:n(ə)l ɔ:dɪt/ noun an evaluation of the effectiveness of a company’s public relations carried out by an outside agency …   Marketing dictionary in english

  • external audit risk — See *audit risk (definition 1) …   Auditor's dictionary

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  • Audit committee — In a publicly held company, an audit committee is an operating committee of the Board of Directors, typically charged with oversight of financial reporting and disclosure. Committee members are drawn from members of the Company s board of… …   Wikipedia

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