Page 46 - Banking Finance November 2020
P. 46
ARTICLE
ROLE OF
AUDITORS AS A
WATCHDOG IN
A BUSINESS
ENTITY
T he great philosopher Desiderius Erasmus has auditee unit.The power of appointment and dismissal of the
auditor lies with the auditee unit's management and this
said "Prevention is better than Cure". It is in line
sometimes also leads to undue influence of the
with this philosophy that a system of audit has
been developed comprising of auditors working
supposed to be a watchdog on behalf of the shareholders
directly with the businesses to monitor the ways in which a management on the working of the auditor. An auditor is
business entity is doing its business .The business community and other stakeholders and as such, the integrity of the
play a very important part in the growth of the economy of auditor is very sacrosanct and should not be influenced in
the country. Any adverse effect on a business not only any way which is detrimental to the shareholders' interest.
affects the promoters but also their employees, suppliers, An auditor's responsibility is not limited to the shareholders
customers, and other players in the business cycle. In short, only because an audit report is a public document and is
it has a contagion effect on the economy and the severity relied upon by various stakeholders in the economy like
of which depends, among other factors, on the size of the financial institutions, government bodies and the general
company and the business segment it is operating in. public. Hence, it can be said that the auditors play an
important role in ensuring good health of the economy of
An auditor has responsibility towards the shareholders of the
the country as well.
About the author But, in recent times, there have been some disturbing
Arun K Bhardwaj developments in the financial sector that have led to raising
Manager (Research) of serious questions on the independence and impartiality
State Bank Institute of Credit & Risk of auditors while reviewing the financials of companies.
Management, Gurugram These incidents have led to demands for an overhaul of the
audit system.
46 | 2020 | NOVEMBER | BANKING FINANCE