Professional Audit Supervision and Auditor Liability

What Is Supervision?

Supervision involves directing the efforts of a professional audit team to achieve the objectives of the review and to verify that work is performed correctly. The auditor should review the work of every professional team member and ensure that the production process and results align with established procedures.

Types of Auditor Responsibility

Auditors face three primary types of liability:

• Civil: Based on the contract with the client, applying general rules of the Civil Code pertaining to individuals or breach of contract.
• Criminal: Malicious behavior involving deception may lead to criminal charges under the Criminal Code regarding falsified documentation.
• Professional or Administrative: Auditing organizations develop ethical codes of conduct, overseen by ethics committees and disciplinary tribunals. The LAC provides a system of penalties for offenses, enforced by the ICAC. Reiteration of sanctions may lead to removal from the ROAC. Institute resolutions are enforceable once final in administrative proceedings, subject to appeal to the Ministry of Economy and Finance.

Defining an Expert in Auditing

An expert is a person or entity possessing special expertise in a specific professional field outside the scope of accounting and auditing.

The Audit Contract or Letter of Appointment

The contract or letter of appointment is a written agreement between the auditor and the client detailing the purpose, scope of work, fees, and estimated hours of work.

Access to Audit Documentation

Parties authorized to access audit documentation for specific use include:

• The ICAC (technical control).
• Judicial authorities appointed by resolution as authorized by law.

Mandatory Annual Audits for Public Contractors

Companies that receive grants, aid, or engage in works, facilities, services, or the supply of goods to the State and other public bodies are obligated to undergo an annual audit, provided they fall within the limits set by the government via Royal Decree.

Determinants of Management Control

Management control is determined by the environment in which the company operates, its objectives, organizational structure, size, and corporate culture.

Basic Tools of Management Control

The primary tools of management control are planning and budgets:

• Planning: Establishes the main lines of action for the company, embodied in specific programs.
• Budgets: Provide a quantitative shape for programs, accounting for interdependencies within the organization. The plan is general and based on operational assumptions.