What Is The Purpose of An Audit?

What Is The Purpose of An Audit? A thorough audit is different from a regular review in that it’s not only looking at the books, it’s looking at the business itself.

An auditor will look at every single aspect of the business and its management to look for any areas of the problem which could cause significant problems in the future. So, what is the main purpose of an audit?

To ensure that you’re on track to achieving financial targets and that all the figures have been accounted for correctly.

They will also look at the business’s overall performance to make sure that they are meeting targets and meet them well, whilst also looking at any opportunities for improvement.

They will also look into any issues that you have with your business in relation to the way that it is being run. Some areas of concern can include a lack of effective marketing, ineffective customer service, or poor customer satisfaction.

If you have any areas that you think an auditor can help you improve then you should get one to look over your business. There are lots of companies out there who provide these services and it can be quite difficult to find one that will be able to do a good job.

There are three most common types of auditing

Internal Audits

Internal audits, as the name suggests, are conducted by independent third parties who have access to the business’s internal processes.

External Audits

External audits are conducted by government agencies like the IRS or the SEC who have access to a business’s financial statements and financial records.

Criminal Audits

Finally, criminal audits are conducted by law enforcement and regulatory agencies to ascertain the business’ compliance with their own standards.

Internal audits are the easiest to perform since they only require access to the business’s internal documents. However, many people believe that this type of audit is more prone to bias than the other two types because the auditors have no stake in the business’s financial results or the business’ business operations.

While this is true in most cases, it is also a misconception since all auditors can’t have a complete understanding of all business operations.

If there are no internal controls in place that prevent the audit from uncovering any weaknesses or loopholes in the organization’s procedures, it can be just as damaging to the business as it would be for an external audit to find an oversight in the accounting procedures of a bank or a public utility.

The audit does not have access to any internal training

Therefore, it cannot determine whether the business’s employees are performing appropriately or whether the system of internal control has been abused.

External audits are performed to verify the business’s performance, its management’s credibility, its compliance with legal and regulatory standards, and its compliance with its contractual commitments.

These types of audits are usually done by government agencies or private-sector auditors. They are usually required to visit the business’s premises and interview the people inside.

The process is similar to what is typically done by an internal auditor who interviews the people inside the organization. Once the audit is complete, it is then reviewed by the audit committee or the board of directors of the company.

In addition to verifying the business’s compliance with its obligations, it is also required to ensure that the business can sustain itself in a stable economy.

Many companies offer auditing services

The main purpose of these auditing services is to identify problems that are related to the financial reporting system of a company. However, before an audit is done, it is vital to determine if the audit can be successful or not.

If it is successful, then the audit results should be given to the management to use to resolve any issues that are present. However, if the audit is unsuccessful then the financial information will still be there for future review and adjustment.

There are different types of audits and one of the most common ones is the PASC or Program Review Audit.

What Is The Purpose of An Audit? – Conclusion

The process of audit results will vary depending on the level of audit. At the lower levels, the audit report will be sent to the management and may not affect the company in any way.

For example, an audit conducted at the company level will include the results of the audit of the business plan. This includes the analysis of the financial statement, business processes, managerial control, and internal controls as well as reporting guidelines.

It also involves the selection of auditors to conduct the audit. These auditors will provide their recommendations about what needs to be fixed for the company to get back on track and regain the trust that they have lost.

The audit results from the other level include the report of the performance audit.