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Types of Audit

Auditing is one of the most important activities of a business. It is vital to monitor and assess the financial status of the company, its assets and liabilities. It helps a lot in identifying the various problems affecting the business and taking immediate actions for solving it. As there are different types of audits conducted, and therefore, different requirements, it is very important to understand the process thoroughly so that you can make the most out of the audit.

The main function of auditing is to find out the exact financial condition of a company. An audit is basically an “independent review of financial data of any organization, whether profit-oriented or not, regardless of its legal or size structure when such an audit is performed with a keen view to discover the problem areas and to provide recommendations to remedy these problem areas.” While a thorough analysis is necessary, it should be done with a high degree of integrity. Anybody can become a fraud during the process.

There are several methods used by audit to evaluate the major problems faced by a company. The methodology of the audit depends on a number of factors. The primary step in an audit is the investigation of the financial data. While this process may take a few months, a thorough investigation will require at least a year.

The main objective of the audit is to find out the extent of fraud and non-compliance in the financial activity of a firm. During the process of auditing, all records of financial transactions of the company are scrutinized, and any errors detected are immediately investigated. In order to avoid a fraudulent audit, a regular audit is conducted by an independent accountant. If any irregularities are found, they will be pointed out and action taken accordingly. If a major problem is identified, the company will be instructed to carry out a more comprehensive audit of the financial records.

Business entities conduct auditing periodically to ensure that the records of transactions are accurate and complete. The auditors examine the books and documents of the company to establish the transaction cost, and to determine the tax liability of the company. The company will be asked to provide proof that the transaction was carried out legally, and without fraud. The business should also give proof of the management’s ability to control the company’s money, and financial activities.

Companies should provide full information about its financial statements, and the reasons for not filing them. If companies fail to furnish adequate details of their financial activities, then the auditor will request them to provide supporting documentation, which can prove their financial position.

It is essential that all the transactions and other transactions of the company are recorded by the auditors in the right manner so that it can be easily understood by the auditor. It is the duty of the auditors to analyze the transactions in order to detect any irregularities that may arise in future transactions.

In case of serious irregularities, the auditor will question the management on their accounting practices and suggest changes in the company’s financial reports. If the irregularities are ignored, the audit report will contain recommendations to correct the problem.

The auditors report will be presented to the Board of Directors of the company. The Board will take appropriate corrective measures in accordance with the auditor’s report. If the company is under investigation, it will appoint an auditor to investigate further.

It is mandatory for a company to submit its annual or semi-annual statement of accounts and results to the board of directors. This information must include the financial condition of the company, as reported by the auditors, including the revenue and expense of the company during the previous year, the income generated, and expenses incurred by the company during the previous year.

There are different types of auditor who are assigned to audit a company’s financial reports. The audit team includes the three individuals who are responsible for the preparation of the audit report, preparing the financial reports and providing written reports to the company’s board of directors.

Types of Audit
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