Description
Auditing refers to a systematic and independent examination of books, accounts, documents and vouchers of an organization to ascertain how far the financial statements present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditing has become such an ubiquitous phenomenon in the corporate.
Introduction to Auditing:
Auditing refers to a systematic and independent examination of books, accounts, documents
and vouchers of an organization to ascertain how far the financial statements present a true
and fair view of the concern. It also attempts to ensure that the books of accounts are properly
maintained by the concern as required by law. Auditing has become such an ubiquitous
phenomenon in the corporate and the public sector that academics started identifying an
"Audit ociety".
!"#
$he auditor perceives and recognizes the propositions before him%her for
examination, obtains evidence, evaluates the same and formulates an opinion on the basis of
his &udgement which is communicated through his audit report.
Any sub&ect matter may be audited. Audits provide third party assurance to
various stakeholders that the sub&ect matter is free from material misstatement. $he term is
most frequently applied to audits of the financial information relating to a legal person. 'ther
areas which are commonly audited include( internal controls, quality management, pro&ect
management, water management, and energy conservation.
As a result of an audit, stakeholders may effectively evaluate and improve the effectiveness of
risk management, control, and the governance process over the sub&ect matter.
$he word audit is derived from a )atin word "audire" which means "to hear". *uring the
medieval times when manual book+keeping was prevalent, auditors in ,ritain used to hear the
accounts read out for them and checked that the organization-s personnel were not negligent
or fraudulent.
Accounting
*ue to strong incentives .including taxation, misselling and other forms of fraud/ to misstate
financial information, auditing has become a legal requirement for many entities who have the
power to exploit financial information for personal gain. $raditionally, audits were mainly
associated with gaining information about financial systems and the financial records of a
company or a business.
0inancial audits are performed to ascertain the validity and reliability of information, as well
as to provide an assessment of a system-s internal control. As a result of this, a third party can
express an opinion of the person % organization % system .etc./ in question. $he opinion given
on financial statements will depends on the audit evidence obtained.
*ue to constraints, an audit seeks to provide only reasonable assurance that the statements
are free from material error. 1ence, statistical sampling is often adopted in audits. In the case
of financial audits, a set of financial statements are said to be true and fair when they are free
of material misstatements 2 a concept influenced by both quantitative .numerical/
and qualitative factors. ,ut recently, the argument that auditing should go beyond &ust true
and fair is gaining momentum. And the 3 4ublic 5ompany Accounting 'versight ,oard has
come out with a concept release on the same.
5ost accounting is a process for verifying the cost of manufacturing or producing of any
article, on the basis of accounts measuring the use of material, labor or other items of cost. In
simple words, the term, cost audit means a systematic and accurate verification of the cost
accounts and records, and checking for adherence to the cost accounting ob&ectives.
According to the Institute of 5ost and 6anagement Accountants of 4akistan, a cost audit is
"an examination of cost accounting records and verification of facts to ascertain that the cost
of the product has been arrived at, in accordance with principles of cost accounting.
In most nations, an audit must adhere to generally accepted standards established by
governing bodies. $hese standards assure third parties or external users that they can rely
upon the auditor-s opinion on the fairness of financial statements, or other sub&ects on which
the auditor expresses an opinion.
Integrated audits
In 3 audits of publicly traded companies are governed by rules laid down by the 4ublic
5ompany Accounting 'versight ,oard .45A',/, which was established by ection 787 of
the arbanes2'xley Act of 9889. uch an audit is called an integrated audit, where auditors,
in addition to an opinion on the financial statements, must also express an opinion on
the effectiveness of a company-s internal control over financial reporting, in accordance with
45A', Auditing tandard
. ;.
$here are also new types of integrated auditing becoming available that use unified
compliance material. *ue to the increasing number of regulations and need for operational
transparency, organizations are adopting risk+based audits that can cover multiple regulations
and standards from a single audit event. $his is a very new but necessary approach in some
sectors to ensure that all the necessary governance requirements can be met without
duplicating effort from both audit and audit hosting resources.
Assessments
$he purpose of an assessment is to measure something or calculate a value for it. Although the
process of producing an assessment may involve an audit by an independent professional, its
purpose is to provide a measurement rather than to express an opinion about the fairness of
statements or quality of performance.
Auditors
Auditors of financial statements can be classified into two categories(
•
Auditing refers to a systematic and independent examination of books, accounts, documents and vouchers of an organization to ascertain how far the financial statements present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditing has become such an ubiquitous phenomenon in the corporate.
Introduction to Auditing:
Auditing refers to a systematic and independent examination of books, accounts, documents
and vouchers of an organization to ascertain how far the financial statements present a true
and fair view of the concern. It also attempts to ensure that the books of accounts are properly
maintained by the concern as required by law. Auditing has become such an ubiquitous
phenomenon in the corporate and the public sector that academics started identifying an
"Audit ociety".
!"#
$he auditor perceives and recognizes the propositions before him%her for
examination, obtains evidence, evaluates the same and formulates an opinion on the basis of
his &udgement which is communicated through his audit report.
Any sub&ect matter may be audited. Audits provide third party assurance to
various stakeholders that the sub&ect matter is free from material misstatement. $he term is
most frequently applied to audits of the financial information relating to a legal person. 'ther
areas which are commonly audited include( internal controls, quality management, pro&ect
management, water management, and energy conservation.
As a result of an audit, stakeholders may effectively evaluate and improve the effectiveness of
risk management, control, and the governance process over the sub&ect matter.
$he word audit is derived from a )atin word "audire" which means "to hear". *uring the
medieval times when manual book+keeping was prevalent, auditors in ,ritain used to hear the
accounts read out for them and checked that the organization-s personnel were not negligent
or fraudulent.
Accounting
*ue to strong incentives .including taxation, misselling and other forms of fraud/ to misstate
financial information, auditing has become a legal requirement for many entities who have the
power to exploit financial information for personal gain. $raditionally, audits were mainly
associated with gaining information about financial systems and the financial records of a
company or a business.
0inancial audits are performed to ascertain the validity and reliability of information, as well
as to provide an assessment of a system-s internal control. As a result of this, a third party can
express an opinion of the person % organization % system .etc./ in question. $he opinion given
on financial statements will depends on the audit evidence obtained.
*ue to constraints, an audit seeks to provide only reasonable assurance that the statements
are free from material error. 1ence, statistical sampling is often adopted in audits. In the case
of financial audits, a set of financial statements are said to be true and fair when they are free
of material misstatements 2 a concept influenced by both quantitative .numerical/
and qualitative factors. ,ut recently, the argument that auditing should go beyond &ust true
and fair is gaining momentum. And the 3 4ublic 5ompany Accounting 'versight ,oard has
come out with a concept release on the same.
5ost accounting is a process for verifying the cost of manufacturing or producing of any
article, on the basis of accounts measuring the use of material, labor or other items of cost. In
simple words, the term, cost audit means a systematic and accurate verification of the cost
accounts and records, and checking for adherence to the cost accounting ob&ectives.
According to the Institute of 5ost and 6anagement Accountants of 4akistan, a cost audit is
"an examination of cost accounting records and verification of facts to ascertain that the cost
of the product has been arrived at, in accordance with principles of cost accounting.
In most nations, an audit must adhere to generally accepted standards established by
governing bodies. $hese standards assure third parties or external users that they can rely
upon the auditor-s opinion on the fairness of financial statements, or other sub&ects on which
the auditor expresses an opinion.
Integrated audits
In 3 audits of publicly traded companies are governed by rules laid down by the 4ublic
5ompany Accounting 'versight ,oard .45A',/, which was established by ection 787 of
the arbanes2'xley Act of 9889. uch an audit is called an integrated audit, where auditors,
in addition to an opinion on the financial statements, must also express an opinion on
the effectiveness of a company-s internal control over financial reporting, in accordance with
45A', Auditing tandard
. ;.$here are also new types of integrated auditing becoming available that use unified
compliance material. *ue to the increasing number of regulations and need for operational
transparency, organizations are adopting risk+based audits that can cover multiple regulations
and standards from a single audit event. $his is a very new but necessary approach in some
sectors to ensure that all the necessary governance requirements can be met without
duplicating effort from both audit and audit hosting resources.
Assessments
$he purpose of an assessment is to measure something or calculate a value for it. Although the
process of producing an assessment may involve an audit by an independent professional, its
purpose is to provide a measurement rather than to express an opinion about the fairness of
statements or quality of performance.
Auditors
Auditors of financial statements can be classified into two categories(
•