What is Audit?
Audit is a thorough review of a department’s records and reports, in order to check that assets and liabilities are properly recorded on the balance sheet, and, all profits and losses are properly assessed. To meet the objectives of audit, verification of revenue, expenditure, bank deposits, bank reconciliations, accounts payable and accounts receivable, cash, loans and advances, disbursement and regular transactions is very necessary. “How to audit” an entity’s accounts is variable phenomenon according to the sector it is present in, the revenue generation activities, capacity of employees, market position of an entity and many other factors.
Audit is one of the assurance processes which helps to understand if the routine , on-going activities of the organization are in line with that of the statutory requirements and it identifies discrepancies if any. Audit is a process which helps in continuous improvement in the business processes of and entity. Audit is necessary from the point of view of shareholders, promoters of the company, investors, financial institutions and non-financial institutions, Government.
Audit is inevitable for every sector present in the country. It has various types such as internal audit, statutory audit, management audit, compliance audit, secretarial audit, quality audit, performance audit, project audit, energy audit, operations audit, cost audit, etc.
Audit should always be an independent evaluation that will include some degree of quantitative and qualitative analysis whereas an assessment implies a less independent and more consultative approach. The outcome of the assessment should relate to the norms that were set for the task, product or event and should not be related to the personal views or judgements. An audit must adhere to generally accepted standards established by governing bodies. These standards assure third parties or external users that they can rely upon the auditor’s opinion on the fairness of financial statements, or other subjects on which the auditor expresses an opinion.
This guidance note explains different types of financial audits such as operational audit, grant audit, project audit, information systems audit, compliance audit, investigative audits, due diligence etc.