What is an Audit?
Audit is an efficient assessment of reports and records of a firm by skilled accounting specialists in order to ensure the validity and reliability of financial data. It is considered as the analysis of financial records of a business or firm in order to find out or verify the facts about their financial operation. Generally, several sequential steps are involved in the audit process such as arranging an opening discussion to converse the report format, audit objectives, timing, and allocation, analyzing the accuracy of internal controls, business systems and operations, testing the internal controls to ensure the correct action, communicating with management about all previous examinations, communicating with management regarding the draft audit report and their responses and identify the issues occurred in audit report and finding out the solutions.
With the help of auditing, creditors and possible shareholders can look at the financial statements to choose whether to invest in a business or not. It is also more useful to protect the individuals from scams and corrupt business processes. To analyze the financial transactions, banking and other activities, and physical inventory resolution etc are the major functions of audit. The main motive of the audit is to ensure the facility owner that all the funds received and these accounted in right manner in a particular period of time. The auditing process is considered as the critical evaluation which is done by one or group of individuals that independent from the system audited. An audit is also useful to identify the problems in the financial statementand acquire the improvements.
Audit can be conducted on any activity; initially it is happened from the need for firms in order to verify their financial related data from a self-determining firm or service.There are several advantages offered by the audit to the firm that include specifying the significant areas of a firm, improving a strong sense of internal control, analysing the effectiveness and quality of economy, realizing deceptive occurrences in the business, scrutinizing and recognizing the financial data of a firm.
CHARACTERISTICS FOR PERFECT AUDIT
- Standard and documented
- Skilled and Qualified team
Unbiased – Audit will be unbiased if outcome acquired from every team of audit give similar results. Here entire team will focus on reporting deficiencies instead of delivering good testimony with pressure. Organization professionals of audit members will relate their ethical issues that promote healthy exertion for everyone.
Periodic – The term periodic here represents nature of auditors revisiting at regular interval of duration usually. This return will include re-audit that assesses the output of plans implemented as a result of initial audit. This shows that audit drives for correspondent decisions for future audits.
Systematic – In this process, all team members will agreed to the written audit program in which several processes are included such as the audit schedule, protocols, documentation and reporting specifications and evaluation rules and regulations etc. In this manner, the audit team will follow these processes systematically.
Independent – Audit team does not have a stake in the result of the audit.
Efficient – It mans audit team will achieve the particular targets in specified time period within the budget. By following the rules and systematic procedures, this teal will attain ultimate aim.
Standard and documented – In this process, collected facts from the audit, audit program, any action plans and evaluation of the facts etc will be written. In this procedure, from the audit, an auditor should document the outcomes in a systematic way which will ensure that management and understand the findings and suggestion clearly. This is more valuable in the auditing process which assists the management to analyze the improvements of counteractive activities.
Skilled and Qualified team – This feature clearly explains the audit team must have more knowledge, skills and experience to give right judgement in the process of collecting and analyze the audit information. Auditor or team leader must have the management abilities that are needed for planning, organizing and controlling the effort. The individuals involved in the audit team should also have the interpersonal skills that will assist them to deal the facility manager, other workers, and corporate management.
TYPES OF AUDIT
There are several kinds of audits carried out in diverse fields that include financial audit, compliance audit, performance audit, operational audit, system audit, process audit, performance audit, project audit, media audit, product audit, Integrated Audit, Investigative Audit, System Audits, Application Audits, and Security Audits etc. Financial audit is a historically oriented analysis on financial transactions for the purpose of attaining the accuracy, truth and confidentially of financial related data. Compliance audit is one kind of investigation and verification of observance with a set of rules. Process audit is useful to analyze the operational activities of individuals. Product audit is useful to scrutinize the performance of the products based on the consumer expectations. Project audit is more valuable to evaluate the progress of the project. To analyze the guidelines or rules which are related to media activities, media audit is more useful. A grouping of a department review, operational audit, and IS audit application controls review is called as Integrated Audit which enables systematic investigation of the functional operation within the firm. Security audits are more useful to the firms because it offers complete and cost-effective network vulnerability evaluations through disclosing number of vulnerability tests. System audit is designed and executed into the system in order to ensure the reliability of financial data which is processed by the system and maintain the correct functionality. In this manner, these various types of audits are more valuable to the firms in maintaining their financial transactions.