What is an Audit?
An audit is an advisory service the auditors and CPA firms employ through the GAAS (Generally Accepted Auditing Standards) to examine and evaluate the financial and accounting performance, legal procedures, the quality, job security of a company, and the direction to be taken, among others.
The financial statement audits are performed by essential bodies and elements that provide a correct compliance audit, such as financial management, compliance auditors, independent auditors, the APA (Auditors of Public Accounts) that audit the books and accounts of each officer, commission, board, department, the court of state government, and state-aided institutions; the IIA (Institute of Internal Auditors) that is in charge of internal auditing, and others, inter.
Types of Audits
The financial audit, also known as an external audit, consists of the examination of the financial statements of a company, carried out by independent auditors applying the accounting standards in force.
The internal audit function is developed by internal or external personnel of a company that verifies the basic controls thereof, ensures legal compliance, proposes improvements to reach the objectives planned, and maintains accurate and timely financial reporting before the external auditors’ review. Finally, the resulting report is submitted to management and the board of directors.
The tax audit examines the tax return through the IRS (Internal Revenue Service) to evaluate and inspect whether the income and deductions are accurately processed.
Benefits of Audits
The following are some of the benefits of audits:
- Greater certainty in decision-making for better investment and financing.
- Increased confidence in shareholders, banks, or financial institutions, due to reliable information on the company’s financial situation.
- Implementation of internal control policies and procedures.
- Knowledge of the company’s performance and financial situation.
- It focuses on the risk areas that could affect the client’s value creation processes, which means audit efficiency and effectiveness.
Finally, the audit is a collection, accumulation, and evaluation of evidence a business owner of an entity requires to determine and report the degree of compliance between the information and the established criteria.
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