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.
Audit can be done by an outside firm or an independent auditor. The idea is to
check and verify the accounts by an independent authority to ensure that all
books of accounts are done in a fair manner and there is no misrepresentation or
fraud that is being conducted.
All the public listed firms have to get their accounts audited by an independent
auditor before they declare their results for any quarter.
There are four main steps in the auditing process. The first one is to define the
auditor’s role and the terms of engagement which is usually in the form of a letter
which is duly signed by the client.
The second step is to plan the audit which would include details of deadlines and
the departments the auditor would cover. Is it a single department or whole
organisation which the auditor would be covering. The audit could last a day or
even a week depending upon the nature of the audit.
The next important step is compiling the information from the audit. When an
auditor audits the accounts or inspects key financial statements of a company,
the findings are usually put out in a report or compiled in a systematic manner.
The last and most important element of an audit is reporting the result. The
results are documented in the auditor’s report.