What you should know about Career in Auditing

Definition and Meaning of Auditing

The term ‘audit' is derived from the Latin term ‘audire' which means ‘to hear.' In early days a person had to listen to the accounts read over by an accountant to check them.

Originally too, its meaning and use were confined merely to cash audit and the auditor had to ascertain whether the person responsible for the maintenance of accounts had properly accounted for all the cash receipts and payment on behalf of this principle.

Audit means performance to ascertain the reliability and validity of the information. Examining books of accounts along with vouchers and documents to detect and prevent future errors/frauds is the main function of auditing. It safeguards the financial interests of the company.

It 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 the accuracy of financial statements provided by the organisation.

Career in Auditing

Examining books of accounts along with vouchers and documents to detect and prevent future errors/frauds is the main function of auditing. It safeguards the financial interests of the company.

Audit is the critical examination of Balance Sheet and Profit and Loss Account prepared by others together with books of accounts and vouchers in such a manner that the auditor may be able to satisfy himself and honestly report that, in his opinion, such Balance Sheet is properly prepared so as to exhibit a true and correct view of the state of affairs of the particular concern according to the information and explanations are given to him and as shown by the books of the firm.

An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency.

Virtually all parts of an organization can be subjected to an audit. Managers, the board and/or external parties can help to determine the priority areas based on their organization's unique circumstances. A helpful way to determine what is a priority is to determine the effects and amount of recurrence due to failed processes. Managers should generally focus on first fixing areas where this impact is high.

 

Objectives of Auditing:

The basic objective with which auditing is done are:

1. Verification of accounts and statements.

2. Detection of errors or frauds.

3. Prevention of errors or frauds.

The auditor is given a free hand to the books, accounts, statements enabling him to thoroughly check them and if satisfied to certify that books have been properly drawn up and represent a true view of the financial position of the business. He gives his special attention to the direction of errors which may be innocently or intentionally committed.

In the case of former the auditor discovers the errors by vouching the transactions and by comparing and tallying the balances between and amongst various books. But in the case of latter such errors are classified as frauds as it leads to defrauding the proprietors. The frauds could be detected by a thorough checking of the books and documents such as cash book, vouchers, invoices, wage sheets, etc.

Importance of Audit

Auditing has several advantages which are given as follows:
1. It detects errors and frauds with suggestions for their prevention, and to avoid such mistakes being committed the accounts are kept up-to-date.

2. The parties feel confident of the audit report because the auditors are competent persons in the fields of accounts and financial laws so can render advice to management.

3. Audit satisfies the owners about the working of the business operations and the functioning of its various departments.

4. The independent opinion of the auditor is extracted through auditing which is extremely essential for the management of the company.

5. The audit establishes a moral check on the staff of the business so that they became aware of not committing any irregularity. This makes the staff more active and responsible.

6. Audit creates confidence among stakeholders such as creditors, debenture holders, and banks, etc. In case of joint stock companies the director has no chance of taking undue advantages.

7. Audited statements ensure compliance with legal requirements such as listing requirements of stock exchange etc.

8. Auditing reinforces and strengthens Internal control and provides suggestions necessary in the internal control system.

9. Audited financial statements enable easy access to loans because it provides a crystal clear image to the banks.

Classification of Auditing:

Auditing could be classified into two:

1. Continuous or detailed.
2. Periodical or final audits.

1. Continuous Audit:

Continuous or detailed Audit: is useful in case of big companies with larger business which have scope for keeping the audit staff busy year round or auditors may attend to auditing at intervals fixed or otherwise, and perform an interim audit. In this case, routine business goes on simultaneously with the audit work.

2. Periodical or Final Auditing:

Periodical or Final Auditing: After the completion of the financial year audit work is undertaken which goes on continuously till its completion. This system is the most satisfying from the auditors point of view.

 

Different types of audit

Internal audit

Internal audits take place within your business. As the business owner, you initiate the audit while someone else in your business conducts it. Businesses that have shareholders or board members may use internal audits as a way to update them on their business’s finances. And, internal audits are a good way to check in on financial goals.

Although there are many reasons you may conduct an internal audit, some common reasons include to:
  • Propose improvements
  • Monitor effectiveness
  • Make sure your business is compliant with laws and regulations
  • Review and verify financial information
  • Evaluate risk management policies and procedures
  • Examine operation processes

External audit

An external audit is conducted by a third party, such as an accountant, the IRS, or a tax agency. The external auditor has no connection to your business.
Like internal audits, the main objective of an external audit is to determine the accuracy of accounting records. Investors and lenders typically require external audits to ensure the business’s financial information and data is accurate and fair.

Types of Audit that can be conducted

There are many types of audits that can be conducted, including the following:
  • Compliance audit.
  • Construction audit.
  • Financial audit.
  • Information systems audit.
  • Investigative audit.
  • Operational audit.
  • Tax audit.
  • Payroll Audit
  • Pay Audit
  • Forensic Audit

Audit reports

When your business is audited, external auditors usually give you an audit report. Audit reports include details of the audit process and what was found. And, the report includes whether your financial records are accurate, missing information, or inaccurate.

Career in Auditing

1. It is a job in high demand. As long as there is business to be done, there will be a job for auditors. Experts say the number of jobs for accountants and auditors will grow 11 percent from 2014 to 2024, faster than the average for many other occupations. 

2. If you choose a career in audit, you can work with tech companies, banks, healthcare organizations, and retail companies to name a few. 

3. It's in the corporate spotlight

4. You can Bank on it; Its a high paying job

5. Always moving up; As a public company auditor, you will have endless opportunities to continue your education and development, while still getting paid.

6. If you choose a career in audit, you can work with tech companies, banks, healthcare organizations, and retail companies to name a few.

Conclusion

The basic function of auditing is to ascertain the authenticity of books of accounts prepared by the accountant. It is a well-known saying that “where the function of Accountant ends, the audit begins to determine the true and fair picture of such accounts.

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