There are multiple purposes for auditing of any enterprise. It is mandatory for all publicly listed companies to audit their financial statements, and subsequently make it available to the public. Audited financial statements can be used for improving internal controls or for assessing the financial position or performance of an entity. The elements of financial transparency which results out of audit help in establishing a good relationship with investors and the company.
While preparing for an audit, it’s important to set internal controls and policies that are monitored and reviewed by the internal audit team. The auditing group which performs such audit collects substantial information relevant to the enterprise, and issues statement or opinion about the quality and integrity of the company’s operations and financial status. During the statutory audit, the auditor has to review the processes and procedures by which the financial information was prepared. That is, the auditor has to check if the preparation of the company’s financial reports is aligned with GAAP or other applicable reporting frameworks. Statutory audits underscore the importance of financial reporting in corporate transparency.
There are multiple types of audit as elaborated below;
Financial – Financial audits typically look into the accounting controls present in the general ledger or sub-ledger systems. Financial statement auditing is the focus of our external auditors.
Operational – Operational audits focus on the review and assessment of a business process. The activities of the business process may result in a direct or indirect financial impact on the organization. Internal Audit primarily focuses on operational audits but can extend the scope to include accounting procedures that can impact financial reporting.
Compliance – Compliance audits review the level of compliance with internal policies or external regulatory requirements.
Information Systems – Audits of Information Systems look at the overall infrastructure and network controls that relate to the security of the network and the systems. Such audit includes technical operations, data center operations, project management procedures, and application controls.
Integrated Audits – Integrated audits look at controls that address financial, operational, compliance and information systems risks. These audits are typically centered on a business cycle or a specific part of a process.
Auditors protect the public from investing in companies that use corrupt business practices or that attempt to defraud investors with false financial statements. They also provide assurance to investors and creditors that company funds are handled appropriately. By reviewing financial statements and digging into accounting records, auditors can determine if the financial statements and records accurately depict the company’s true financial profile.