Auditing is an independent process, in which events and actions of a company are recorded. These records are then used to present a review of the company’s financial statements, known as an audit.
Auditing is performed to ensure that financial information given about a company is valid and reliable. It also provides an assessment of the internal control system used by a company or a business. Simply, it provides assurance for third parties or external users that such statements ‘fairly’ present a company’s financial condition and results of operations.
The process of auditing involves systematically examining accounts, books, documents and other relevant information sources to determine whether the stated purpose of the enterprise concerned is being met. The auditor will analyse the situation and make a judgement on it through their audit report.
Types of auditors
There are two types of auditors:
These are employees of a company who have been hired to assess and evaluate the company’s system of internal control. They present their reports directly to the Board of Directors, or to the Top Management.
These are independent staff who are 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.