Accountability
• An obligation of an organization or individual to account for activities
and accept blame for failures. A person who is accountable may be
called upon to answer and account for outcomes.
• “It refers to the ability to answer for one's own actions, or it is the ability
and willingness to assume responsibility for one's actions and to accept
the consequences of one's behaviour”.
4 Pillars of Accountability
• Responsibility • Trustworthiness
A duty that Binds to the A trait of being worthy of
course of action. trust and confidence
• Answerability • Liability
Being Called to Account Being legally bound to a
debt or obligation
Example
• A customer service representative
cancels a customer's account out of
spite after they perceive the customer
as being rude. The customer publicizes
their experience. The customer service
manager is called upon to account for
the incident to executive management.
In this case, the customer service
manager is accountable for the incident
and the customer service representative
is responsible for the incident.
Lack of Accountability
Introduction
• The term audit usually refers to a financial statement audit.
• A financial audit is an objective examination and evaluation of the
financial statements of an organization to make sure that the financial
records are a fair and accurate.
• Public companies are subject to provisions of the Securities Act of
1933 and the Securities.
• Exchange Act of 1934 that make an annual external audit a legal
obligation
• Auditing Can Be Done by Two Different Auditors.
• Internal Auditor
• External Auditor
Internal Auditors
• Internal auditors work for the organization
as internal employees to examine records
and help improve internal processes such
as
• operations
• internal controls
• It will held on daily . Weekly or monthly
• It provide operational efficiency
External Auditors
• External auditors come in from outside the
organization to examine accounting and
financial records and provide an independent
opinion on these records.
• The report generate by external audit is
provided to stakeholders
• It will held on Yearly
• It provide accuracy and validity of financial
statement
Advantages of Auditing
Ensures account correctness: Auditing conducts a detailed examination of all
accounting books of an organization. It finds out the accuracy of financial records
and ensures whether they fulfill all statutory requirements or not.
Detects and prevent errors: It plays an efficient role in finding out errors and
prevention of fraud. Auditing evaluates each financial transaction of business for
checking if there is any mistake or not. This way it reduces the chances of errors
and overall risk occurring due to such errors or frauds.
Helps in maintaining accounts regularly: Maintenance of all accounts on a
regular basis is another major advantage provided by the auditing process. It
keeps a check on the regularity of account and raises questions if they are not
maintained in an adequate manner.
Easy procurement of loans: Auditing reports serves as a tool for easily acquiring
the required funds from various financial institutions. These reports depict the true
financial position of organizations to investors which helps them in deciding the
credibility of concerned business organizations.
• Keeps morale check: Auditing monitors the overall financial dealing of
organizations. This prevents the working staff from committing any error
and fraud. All employees work efficiently towards their role with a fear that
all irregularities will be identified by auditing.
• Assists in decision making: It provides valuable information to
managers for efficient decision making. Auditing is done by various experts
of account and finance who have detailed knowledge of subjects, so they
provide advice and resolves all problems.
• Stakeholder’s confidence: Auditing statements enables in gaining the
confidence of stakeholders. All stakeholders such as creditors,
shareholders, banks, investors, etc. have more confidence in audited
financial accounts of the company.
Disadvantages of Auditing
• Costly: Auditing process puts a financial burden on organizations as it requires
the huge cost to conduct an examination of all financial accounts. Business
needs to pay large fees to auditing experts for their services.
• Rely on experts: Auditor is dependent on experts of various fields for
conducting auditing process. For acquiring true information regarding the
valuation of fixed assets and contingent liabilities, he needs to approach valuers,
engineers and lawyers.
• Impossibility of checking all transactions: Another major drawback of
auditing is that it is not always possible to check each financial transaction of
organizations. Some organizations are too big and have a large number of
transaction, where evaluating all of them become quite an impossible task.
• Unsuitable for small concern: Auditing may not be fruitful for small
organizations where there are limited transactions. Their accounts can be
evaluated without an audit program.
• Chances of fraud: Audit may lead to errors and frauds in a business. Audit staff
may perform their task carelessly and present an inaccurate audit report. Also,
there may be chances where staff auditing accounts may be harassed within the
organization and may be forced to manipulate the figures
