Auditing
Introduction
Examination and verification of accounts are one of the vital aspects in business to maintain financial records. Accounting and auditing both are significant to ensure the accurateness of financial records and transactions. Auditing is basically an examination and verification of account books. Companies hire qualified personnel for the purpose of audit within the organization. It is an activity to determine evaluation and examination of an evidence. It is basically an analysis of financial records which are carried by an organization. It is important for a company just to gain a perspective of the company’s financial statements. Auditing also helps to protect the general public from any corruption or scam procedures within the business (Gilbert, 2007).
Why Auditing is important
Auditing plays a key role in the development of any organization, companies usually hire qualified chartered accountants to perform the task of auditing for the company. Though auditing has several important aspects of the organization, some of them are as follows:
Detect Errors and Frauds
Tax Payments
Improves Efficiency
Long term Planning
Enhancement of Internal Control
Partners Satisfaction
Detect Errors and Fraud
Audit practice within a company is an important element for the company. Auditing helps in identifying various errors in the business. Auditing basically locates and rectifies the errors in the accuracy of financial records in a company. The more the information is error free, the more it proves to be beneficial for the business. The audit also discovers fraudulent activities within the business. Auditing helps in identifying the person or the individual responsible for the fraud within the financial statement of the company (Gilbert, 2007).
Tax Payments
Another benefit of auditing is that it organizes the process of tax payments by a company. Structure of taxation is properly organized in audit, where the accounts attracts the investors and business people in a significant manner to pay the tax.
Improves Efficiency
Auditing improves the efficiency of an organization as well as the employees. Auditing practices improve the skills of the employees too. Consequently, it brings more trained and qualified employees within the organization that facilitates in the policy making and other decision making because of the accuracy of the auditing principles.
Long term Planning
Auditing brings in efficiency to the entire business practices, it provides a fair view of business activities. Audited records can be utilized for long term planning, it also assists in preparing budgets for the future. Auditing can also be useful while preparing forecasted financial statements for the purpose of long term planning of the business (Marks, 2001).
Enhancement of Internal Control
The auditor provides great support for the efficiency of the internal control within the organization. Auditor recommends the areas for improvement and management where it is responsible to overcome the weak areas as identified by the auditor. The better the internal control, the more effective the working of the organization becomes.
Partners Satisfaction
Auditing is very important from the partner’s perspective also. Audited records provide satisfaction to the partners and ensures them that they are investing in the right company and will get the just profit on the revenues earned by the company.
Difference between Internal and External Audit
There are two types of audit which are the internal and external audits. Internal auditing is basically an independent consulting activity that is designed to add value within a company’s operation. It also helps in accomplishing an organization’s objectives by brining disciplined and systematic approach to evaluate and increase the risk effectiveness and control the governance process (Dater, 1991). It is the catalyst which also improves the risk management tends controls the management to provide the recommendations which are based on the analysis and the overall assessment of the business and data procedures. With a commitment to accountability and integrity, the internal audit provides the value of the governing bodies and the senior management as the objective source of independent advice. The company hires professional accountants that are the internal auditors within a company (Marks, 2001).
External audit is an independent structure which exists outside the organization which it is auditing. Their basic responsibility of an external audit is to perform the annual legal audit of the financial reports which provides the true picture of the company’s financial position. External audits are quite often evaluating and examining the internal controls that are put in place to manage the risks which affect the financial accounts........................
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