The auditor is audited by another auditor. Initially, an internal audit is conducted, for which the specialists of the full-time audit service or a full-time auditor are responsible if there is such an employee in the organization. Then, an external audit is carried out by third-party audit companies or individual auditors under the contract. Thus, by comparing two audits, the audit of an internal specialist is checked for qualification (Berk et al., 2020). Often, such responsible two-factor checks must be carried out in the form of a combined audit: individual risky operations are subject to detailed verification, and all other routine operations are checked selectively by an external auditor.
You can keep the auditor’s honest by using different methods of collecting information and conducting checks in different ways. All of them must be regulated by the internal rules of the company or prescribed in regulations. When choosing a particular method, experts should be guided by the set goals and objectives within the framework of agreements with the audited organization (Berk et al., 2020). For additional control when solving particularly important tasks, it is necessary to involve external unbiased auditors in order to verify the results of a full-time employee and thus conduct an integrity check.
Auditing didn’t catch Bernie Madoff’s Ponzi scheme because, for more than a decade, the cumulative average annual return on rich clients’ accounts was 15%. Usually, when using financial pyramids, the profitability is very high, so a low but stable percentage of profitability made depositors feel confident. In addition, the SEC investigated Madoff’s company at least five times and never found any violations (Betti & Sarens, 2021). This is due to the unreliability of the information transmitted by Bernard’s brother Peter about the number of open accounts and insufficient quality audit that did not verify their reliability.
References
Berk, J., Demarzo, B., & Hartford, O. (2020). Fundamentals of corporate finance. Pearson.
Betti, N., & Sarens, G. (2021). Understanding the internal audit function in a digitalised business environment. Journal of Accounting & Organizational Change, 17(2), 197-216. Web.