What is an audit?
An audit is a process that involves reviewing financial records and other documents to determine whether a company has been following its policies and procedures. Audits are used to ensure compliance with regulations, laws, and standards. Audits are usually performed by independent auditors hired by the company being reviewed.
A good audit will help identify areas where there might be room for improvement. It also helps you understand how well your company is performing compared to others in your industry.
Merriam Webster Online
Definition of audit
- 1a: a formal examination of an organization’s or individual’s accounts or financial situation
b: the final report of an audit - 2: a methodical examination and review
Wikipedia
An audit is an “independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon.” Auditing also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditors consider the propositions before them, obtain evidence, and evaluate the propositions in their auditing report.
Different types of audit
Internal audits
Internal audits are performed by employees within the company. These audits are usually done as part of the regular operations of the company. This type of audit will help ensure that the company is complying with all the rules and regulations set forth by the government.
External audits
Internal audits are typically carried out by the company itself. However, external audits are often required by law. Companies must conduct an annual audit to make sure that they are following all the laws and regulations set forth by their country. External audits are conducted by outside companies. These audits are often used to check up on the internal processes of the company.
Forensic audits
Forensic auditing is often used after a company has been accused of fraud or embezzling funds. A forensic auditor will examine records and interview employees to determine whether any illegal activity took place.
