Following are some of the essential duties associated with the external auditor.

1-Maintain independence as auditor

Throughout the audit engagement and reporting, the auditor is required to ensure independence from the audit client. In other words, the auditor needs to ensure that threats to the auditor’s independence, such as self-interest, self-review, familiarity, intimidation, and advocacy, are appropriately managed.

2-Assessing risk of material misstatement

The auditor must assess the risk of material misstatement to assess the engagement risk. The risk is assessed via business understanding and internal control assessment. Business understanding refers to going through business operations, products, markets, competition, applicable regulations, customers, industrial trends/practices, compliance, etc.

3-Design appropriate audit procedures

The auditor is required to plan appropriate audit procedures based on the assessed risk of material misstatement. The extent of planned audit procedures depends on the level of risk assessment. For instance, if a higher risk is assessed, the auditor must plan extended audit procedures, and vice versa.

4-Collect sufficient and appropriate audit evidence

The purpose of performing audit procedures is to collect sufficient and appropriate audit evidence. Sufficient evidence refers to quantity, and appropriateness refers to the quality of the audit evidence. So, if the auditor is confident in the audit evidence, they form their opinion on the financial statements.

5-Form audit opinion

The auditor concludes their opinion on the set of financial statements based on audit evidence. So, suppose the auditor believes that nothing has come to their attention that causes them to believe the financial statement contains a material misstatement. In that case, they must issue a clean audit report and qualified/disclaimer/adverse in other scenarios.

6-Report your audit finding

There are generally four types of audit reports: clean, qualified, adverse, and disclaimer. A clean audit report is issued when the auditor believes the financial statement does not contain significant misstatements.

A qualified audit report is issued when a specific area contains a material misstatement or there is a scope limitation for a specific account balance/transaction.

An adverse audit report is issued when a misstatement is pervasively material, and a disclaimer is issued when the scope is limited and the assessed impact is pervasively material.

Conclusion

The external auditor is primarily responsible for issuing a quality audit report backed by sufficient and appropriate audit evidence. The auditors are required to maintain independence throughout the auditing process.

In sequence, the auditor’s responsibilities include maintaining independence, assessing the risk of material misstatement, designing audit procedures, assembling sufficient and appropriate audit evidence, forming an audit opinion, and reporting the audit.  

From an independence perspective, the auditor is required to manage threats like self-interest, self-review, familiarity, intimidation, advocacy threats, etc., by implementing safeguards.