What is Auditing?
Audit is an essential procedure in any kind of business to keep track of financial, asset, and other funding issues. Distinctive concepts of audit, carefully chosen and applied to different accounting and financial strategies.
A financial statement audit, is an independent appraisal of the financial statements prepared by the organization. The main objective of a financial statement audit is to provide an independent assurance that the management has, in its financial statements, presented a “true and fair” .
The audit of a financial statement will add credibility to the financial position and performance of the business. Similarly, lenders typically require an audit of the financial statements of any entity to which they lend funds. Before extending trade credit suppliers may also require audited financial statements.
Disclosure of fraudulent is reported by major companies while financial audit been conducted on two primary accounting frameworks, Generally Accepted Accounting Principles and International Financial Reporting Standards.
On preparing annual financial statement audit is expensive in certain business. The least expensive is a compilation, followed by a review. In addition to annual audit, publicly held entities have to review its financial statements quarterly. By conducting audit in quarterly basis, business process of firm can improve according to the performed audit and it eases the annual audit.
Our professional auditors are the members of the recognized professional accounting bodies.
Due Diligence: Audit is an investigation or examination of a business or person prior to signing a contract, or an act with a certain standard of care.
The investigation or examination could be carried out for a potential objective for merger, acquisition, privatization, or similar corporate finance transaction normally by a buyer.
It can be a legal, but when voluntary investigation is called for this due diligence audit is applied. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a company which he has targeted or its assets for an acquisition.
Due diligence takes different forms depending on its purpose:
- This can include self due diligence or “reverse due diligence”, i.e. an assessment of a company, usually by a third party on behalf of the company, prior to taking the company to market.
- A reasonable investigation focusing on material future matters.
- Basic inspection report achieved by asking certain key questions, including, how do we buy, how do we structure an acquisition, and how much do we pay?
- Current practices and process underwent with this type of audit
- The due diligence process (framework) can be divided into nine distinct areas.
- Compatibility audit
- Financial audit
- Macro-environment audit
- Legal/environmental audit
- Marketing audit
- Production audit
- Management audit.
- Information systems audit
- Reconciliation audit
Internal audit: Nowadays businesses operate in the fast, competitive and ever-changing environment. Their success is based on the ability to adapt to the environmental changes, to fulfill organizational objectives and to manage risks as the business landscape evolves every day.
Internal audit is “an appraisal activity established within a company as a service. Its functions include examining, evaluating and monitoring the adequacy and effectiveness of the accounting and internal control systems.
The scope of internal auditing is broad and wide. Auditing involve important processes in business like organization’s governance, risk management and management controls. Internal auditing may also involve conducting proactive fraud audits to identify potentially fraudulent acts.
Internal Auditors’ roles include supervising, evaluating, investigating and analyzing organizational risk and controls; and reviewing and confirming information and compliance with policies, procedures, and laws.
Internal audit may involve subjects like organization’s governance, risk management and management controls. Internal auditing may also involve conducting proactive fraud audits to identify potentially fraudulent acts; participating in fraud investigations under the direction of fraud investigation professionals, conducting post investigation on fraud audit to determine financial loss and business breakdown.
The Internal Auditing profession evolved steadily with the progress of management science. It is similar in many ways to financial auditing by public accounting firms, quality assurance and banking compliance activities. Management consulting professional and public accounting professionals use audit technique underlying internal auditing
Professional internal auditors are to be independent of the business activities they audit. Although internal auditors are part of company management and paid by the company, the primary customer of internal audit activity is the entity charged with oversight of management’s activities.
Internal auditing activity also relates to corporate governance which is accomplished primarily through participation in meetings and discussions with members of the Board of Directors. Internal auditors typically issue reports at the end of each audit that summarize their findings, recommendations, and any responses or action plans from management.
Forensic & Investigative Auditing: Consists of the detection, tracing, quantification and prevention of fraud, money laundering and terror finance. Investigative Auditing involves the examination of financial accounts and the use of accounting techniques to discover financial irregularities and to follow the movement of funds and assets in organizations.
The objects of Investigative Auditing include,
- identification of suspects;
- determination of damages;
- quantification of damages;
- prevention of damage;
- identification of financial activity;
- tracing of financial assets.