What is Auditing?

An audit is an independent process of recording selected events and actions, which are then used to present a review of the company's financial statements.

Audits are performed to obtain the validity and reliability of financial information, and also provide an assessment of a company or a business' system of internal control.

It simply provides assurance for third parties or external users that such statements present 'fairly' a company's financial condition and results of operations.

There are two types of auditors:

Internal Auditors –

These are employees of a company hired to assess and evaluate its system of internal control. They present their reports directly to  the Board of Directors or to Top Management.

External Auditors –

These are independent staff assigned by an auditing firm to assess and evaluate financial statements of their clients, or to perform other evaluations. Most external auditors are employed by accounting firms for annual engagements.