The Role of the External Auditor

To help fulfill its "gatekeeper" role, the Audit Committee appoints external auditors to examine and report on the presentation of the financial statements. The external auditors must possess the expertise and independence to serve as good agents for the Audit Committee. Because of the public interest served by external audit firms, they must have a permit to practice public accountancy in the State of Minnesota. External auditors must adhere to professional auditing standards and implement quality assurance practices in order to receive a permit to practice from the Minnesota State Board of Accountancy.

Professional auditing standards are promulgated by the American Institute of Certified Public Accountants (AICPA). The AICPA web site offers a tool kit for Audit Committee members. The web site provides detailed information on the role of external auditors.

External auditors are required to communicate certain issues related to the audit to the Audit Committee. Required communications include:

  • Auditor responsibilities under Generally Accepted Auditing Standards,
  • Disagreements with Management,
  • Consultations with other Auditors,
  • Major Issues Discussed with Management before Retention, and
  • Difficulties Encountered in Performing the Audit.