Understanding Audits: Types, Purpose, and Fundamental Principles

Question 2 What are audits and why are they carried out? Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation. The purpose of an audit is to form a view on whether the information presented in the financial report, taken as a whole, reflects the financial position of the organisation at a given date, for example: Are details of what is owned and what the organisation owes properly recorded in the balance sheet? Examples of auditing evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. Good auditing evidence should be sufficient, reliable, provided from an appropriate source, and relevant to the audit at hand. There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits. Fundamental Principles Governing an Audit: A] Integrity, Independence, and Objectivity: ... B] Confidentiality: ... C] Skill and Competence: ... D] Work Performed by Others: ... E] Documentation: ... F] Planning: ... G] Audit Evidence: ... H] Accounting Systems and Internal Controls: