I disagree with the statement that auditing is not necessary for effective financial reporting. This is due to the fact that its main objective is to obtain reasonable assurance, whether the financial statement does not have financial misstatement, caused by error or fraud. AICPA (2013) suggests that a financial statement audit offers an independent, third party opinion to Department of Labor (DOL), plan management, participants and other interested parties to which financial statement plan offers reliable information in assessing the present, and future plans in benefit payment. The future integrity of the benefit plan of an employee is assisted by a financial statement audit. For example, it assists the user to determine if the essential funds will be enough to pay health insurance, retirement, and other benefits. Thus, auditing is important to employees, managers, business owners an all players in an organization.
Auditing assists plan management in streamlining and improving the operations of the plan. AICPA (2013) explains that plan operations are improved by the evaluation of the plan internal control strength against financial reporting while identifying plan operational errors or control weakness. It also assists the sponsors of the plan in undertakings on legal responsibility to file an accurate and complete file. Governance which is provided by auditing is an important aspect of every organization, as it assists in, appropriate behavior, credibility, and equity of all agent and parties in the company. Therefore, auditing is a crucial factor that reduces corruption in all business sectors.
Auditing also plays an important role in the public sector. According to IIA (2012), auditing offers unbiased, objective assessments that ensure responsible management of public resources. The public sector organizations instill confidence among stakeholders and citizens, improve operations and achieve integrity and accountability. Auditing in these sectors assists the governance responsibilities to foresight, insight, and oversight. It is, therefore, important that the activities of auditing are appropriately configured so as to achieve the above responsibilities. Due to these facts, auditing is a cornerstone in financial reporting of every organization.
AICPA. (2013). Employee Benefit Plans-Financial Statement Audits. Employee Benifit Plan Audit Quality Center. https://www.schneiderdowns.com/UserFiles/File/employee-benefit-plans-financial-statement-audits.pdf
IIA. (2012). Supplemental Guidance:THE ROLE OF AUDITING IN PUBLIC SECTOR GOVERNANCE. The INstitute of Internal Auditors. https://na.theiia.org/standards-guidance/Public%20Documents/Public_Sector_Governance1_1_.pdf
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