An audit is an evaluation of a person, organization, enterprise, system, process, project or product, which is performed to ascertain the validity and reliability of information. The goal of an audit is to express an opinion on the system/organization/ person / in question, under evaluation based on work done on a test basis. Auditing is the independent examination of financial information of any entity, whether profit oriented or not, and irrespective of legal form, or its size when such an examination is conducted with a view it expressing an opinion thereon.
Types of Audit
There are two types of Audit:
- Internal Audit : An audit of internal system is performed by people how directly work for the company. Several companies hire outside firms to perform the audits.
- External Audit : The customer Audits are those where a customer performs the audits very well. A customer is not objective because the customers closely involved with your company.
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Key Benefits of Audit
- Assurance on the reliability of the financial statements or financial information to the users.
- Safeguards the Financial Interest of persons not associated with the management of an entity.
- Moral check on the Employees from committing frauds.
- Preventive Action Required for Business continuity.
- Detection of wastages and losses that occur due to absence or inadequacy of Internal checks or controls.
- Audited statements of accounts are helpful for:
- Settling liability for taxes.
- Negotiating loans.
- Determining the purchase consideration for a business.
- Obtaining license for trading or Grants from Government.
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