Auditing

 What is Bookkeeping (Auditing)?

Audit is the process of evaluating and verifying the financial, operational, and strategic objectives and processes of organizations to determine whether they are in line with the principles above that they are consistent with the organization and, most importantly, regulatory requirements. Indeed, among the objectives of the audit as stated above, compliance with regulatory procedures and rules and regulations is one of the reasons for auditing and historically and culturally, has been a major reason why organizations have their financial statements, procedures, and strategic needs.

Term audits usually refer to the audit of financial statements. Financial audits are the purpose of auditing and auditing the financial statements of an organization to ensure that financial records are an accurate and accurate indication of the transactions they claim to represent. Audit can be done internally by the organization's staff or outside an outside company Certified Public Accountant (CPA).

Understanding Audit

Almost all companies receive an annual audit of their financial statements, such as income statement, balance, and cash flow statement. Lenders often require the results of an external audit every year as part of their credit agreements. For some companies, auditing is a legal requirement because of the compelling incentives to falsify financial information in an attempt to defraud. As a result of the Sarbanes-Oxley Act (SOX) of 2002, publicly traded companies must also undergo a performance audit of their internal controls.

Standards of external audits conducted in the United States, called generally accepted audit standards (GAAS), are set by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA). publicly traded companies are formed by the Public Company Accounting Oversight Board (PCAOB), established as a result of SOX in 2002.3 A separate set of international standards, called International Standards on Auditing (ISA), established by the International Standards Audit and Auditing Board (IAASB).

Types of Audit

Among the various types of auditing, auditing is the most popular followed by performance and strategic audits and in addition to the emerging practice of IT (Information Technology) auditing. In addition, auditing as a process has become so commonplace and compulsory around the world that organizations spend some time getting their books of account and the procedures audited by internal and external auditors.

Internal Audit

Internal Audit refers to the audit conducted by employees and stakeholders within the organization for the purpose of assessing and evaluating whether the organization complies with internal procedures, procedures, rules and regulations in addition to determining compliance with regulatory principles.

Indeed, internal audits are sometimes the first areas for testing organizations to determine whether their account books, operating procedures, and IT infrastructure and security agreements are in line with internal objectives, strategies, and external regulatory requirements.

Having said that, it should be noted that the reason why internal audit can be given more importance than external audits is that as it is done by staff and individuals within organizations, which seems to be a lack of purpose and efficiency without the tendency to “cover things up”. .

External Research

External audits are performed by private and third party organizations and companies that are primarily responsible for monitoring and evaluating the organization's compliance with regulatory requirements.

In addition, some organizations also employ external auditors to "set themselves the mirror" in the sense that any shortcomings and irregularities can be found otherwise "invisible" to senior executives and managers while conducting day-to-day business operations.

In addition, external audits are also compulsory due to regulatory and compliance reasons and because of the stock requirements mandating that external audits need to be conducted annually, quarterly and semi-annually to be presented at regular annual meetings, and at Board of Directors meetings.

In addition, external audits may be required in cases where regulators who suspect "something is amiss" in companies may authorize those companies to be audited by independent auditors and third parties to obtain a "realistic" financial picture and performance information of those companies.

Financial Assessment of Auditing 

As mentioned earlier, financial auditing is a common way of auditing for a variety of reasons including the fact that businesses are there to make money and return profits and make a profit for shareholders. This means that investors and other stakeholders need to know if businesses are operating properly so that their funds are safe and make set returns.

In addition, financial audits are also the most common method of auditing because any variance in accounting shows corporate misconduct in addition to finances affecting almost all of the company’s operational and strategic areas and their businesses.

In addition, financial audits are also the first point of view of whether companies are telling the truth and whether they are concealing or concealing something that can be opened and disclosed in a case study.

Strategic Research, Performance, and IT

Having said that, there are other types of audits like performance audits, strategies, and IT that have become popular in recent years mainly due to the growing complexity of organizational processes and IT infrastructure and the rapid external market that needs to assess whether organizations align their internal processes and strategies with those that drive external strategies. and essentials.

In addition, IT research is conducted to assess and evaluate the suitability of IT infrastructure and IT systems and processes and processes to meet set goals and objectives in addition to being able to withstand IT risks and security breaches. Indeed, with the increasing nature, type, and diversity of IT and the growing complexity of IT infrastructure, IT audits are now as common as financial and operational audits because both internal and external stakeholders need to know if the organisation's IT infrastructure is at a level that it can meet. and defined purposes and objectives.

Other Problems with Auditing and Auditors

In recent years, there have been concerns about audits that are used to conceal and conceal internal deficiencies and weaknesses thus reducing the very purpose of the audit. Indeed, even the external auditors have been found to be working with organizations in this regard and that is why, regulators around the world have turned around and strengthened the controls and requirements of this audit. This was revealed by the way the United States passed new laws such as Sarbanes Oxley following the Enron scandal in which the auditors, Arthur Anderson, were found to be "at a disadvantage" with Enron's management.