What is Audit?
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 theaccuracy of financial statements provided by the organisation.
Importance Of AuditingCredibility and Reliability
:- With an internal auditing system, your business can create accurate and reliable financial reports through which you can gain insights on which segments or product lines are performing best and how to properly allocate resources. Additionally, regular auditing will make your shareholders trust that your accounts are true and fair and that it’s safe to invest in your business.Preventing Fraud
:- If the government audits your financial statements and finds that your business has been manipulating its financial health, or hiding revenue and losses, you’ll likely deal with severe fees and legal punishments. Your business will also acquire a bad reputation, and you will most likely lose reliability in the eyes of your customers and stakeholders.
Types Of Audit
- Statutory Audit of Companies.
- Tax Audit under Section 44AB of the Income Tax Act, 1961.
- Audit under other sections of the Income Tax Act, 1961 such as 80HHC, 80-IA, etc.
- Concurrent Audits.
- Revenue Audit of Banks.
- Branch Audits of Banks.
- Audit of PF Trusts, Charitable Trusts, Schools, etc.
- Audit of Co-operative Socities.
- Information System Audit.
- Internal Audits.
Audit involves the following:-
- Indepth study of existing systems, procedures and controls for proper understanding. Suggestions for improvement and strengthening.
- Ensuring compliance with policies, procedures and statutes.
- Comprehensive review to ensure that the accounts are prepared in accordance with Generally Accepted Accounting Policies and applicable Accounting Standards/IFRS
- Checking the genuineness of the expenses booked in accounts.
- Detection and prevention of leakages of income and suggesting corrective measures to prevent recurrence.
- Reporting inefficiencies at any operational level.
- Certification of the books of account being in agreement with the Balance Sheet and Profit and Loss Account.
- Issue of Audit Reports under various laws.