The subject of management reports has been prominent the past few years. A manag

Question

The subject of management reports has been prominent the past few years. A management report is included in the annual report to shareholders. This report should not be confused with management's discussion and analysis of operations and financial condition that also is relatively new to the annual report.
The management report is included in the annual report to shareholders as a result of the urging of a number of groups and organizations. Consequently, the form and content of the annual report to shareholders continues to evolve as management attempts to present additional information that will be useful to the readers.
Explain the general purposes of the management report.
Identify five subject areas or topics which have been recommended for inclusion in the management report.
Explain why the content of the management report influences the activities of the external auditor the audit engagement?

Explanation / Answer

The auditing profession is something that can involve many different kinds of activities. These activities include protecting investors, organizations, and the economy as a whole. There are very real dangers involved this ever evolving profession. Fraud is most likely the most obvious and most dangerous activity that auditors must detect. The second most dangerous is not doing their job well. External auditors open themselves up to legal liability when they engage in audits, and not performing their job efficiently can be devastating. This article will discuss these dangers, along with the roles and responsibilities of external and internal auditor, including the many career opportunities that come with these professions. External auditors have a great influence on the audit of internal controls through their audit activities, including conferring with management and their recommendations for improvement to internal controls. They provide important feedback on the efficiency of the internal control system. Specifically, external auditors examine on a test basis, transactions and records that support accompanying financial statements and the associated disclosures. They review the accounting principles applied and considerable estimates made by management, and evaluate the overall presentation of an organization’s financial statements. Before an external auditor can conduct his responsibilities, however, they must comply with the generally accepted auditing standards. The most important being the independence the auditor must have in relation to the organizations he/she is auditing, and attaining the adequate training and proficiency to perform an audit.

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