What is an audit? What are the objectives?
What is “audit”?
An audit is an objective examination and an assessment of the financial statements of an organization to ensure that the records are the fair and accurate representation of the transactions it claims to represent. This can be done internally by employees of the organization or externally by an outside company.
What is “proofing”?
What is “proofing” The IRS can conduct checks to verify the accuracy of the taxpayer or other transactions? When an audit is performed by the IRS, it usually carries a negative connotation and is seen as evidence of some sort of irregularity by the taxpayer.
The primary objective of the audit
The main objective of the audit is to verify the validity and integrity of the results presented by the profit and loss account and the financial position presented in the balance sheet. Its objectives are grouped into two groups:
The main objectives of the audit
The main objectives of the audit are to determine the basic audit objectives. They are as follows:
- Study of the internal examination system.
- Check the accounting accuracy of the books of accounts, check the publication, cost, budget, etc.
- Validation and validity of transactions.
- Check the appropriate distinction of capital and the nature of transaction proceeds.
- Emphasis on the existence and value of assets and liabilities.
- Check whether all legal requirements have been met.
- Validation and integrity of operating results included in the statement of income and financial position
- presented in the balance sheet.
These are goals that are set to help achieve the basic goals. They are as follows:
I. Detect and prevent errors
Mistakes are those committed because of negligence, neglect, lack of knowledge or lack of interest. Errors may be committed without or with any vested interest. Therefore, they should be carefully examined. Errors of different types. some of them:
- Errors in principle
- Omission errors
- Errors in the Committee
- Compensation errors
Detect and prevent fraud
Fraud is those that have been committed knowingly with some vested interests in the direction of top level management. The administration fraud to deceive taxes, show management effectiveness, get more commission, sell shares in the market, or maintain market price per share. Fraud detection is the main function of the auditor. Such frauds are as follows:
- Embezzlement of money
- Misappropriation of goods
Dealing with accounts or forging accounts without any embezzlement
Under or above inventory valuation
These scams are usually carried out by senior executives from the business. Therefore, the explanation provided to the auditor is still incorrect. Therefore, the auditor must detect this fraud using skills, knowledge and facts.