There are many different laws that govern the way in which organizations have to manage their funds. Organizations are held responsible for the proper management of the funds entrusted to them by the government, by investors or by shareholders. Financial audits are used as an instrument to examine the ways in which an organization manages its funds. Almost all organizations, including non profit organizations and charities are required to undergo regular fiscal examinations.
One just has to look at the large number of fraud and theft cases that end up in court to realize that auditing is vital. Modern fiscal systems are sophisticated and it is vital to have measures in place that will make it difficult to commit fraud or theft. Auditing also allow the authorities to make sure that the laws governing the finances of a business are honored.
Auditing is always conducted by an independent professional that has no ties to the organization that is being audited. The professional examines all the records of the organization and then produce a report. The report includes explanatory notes and a summary of the accounting policies of the organization. Normally, the report is presented as part of the annual report of the organization and in many cases it becomes available for scrutiny by the general public.
The auditor is empowered to examine all aspects of the business. This includes each and every transaction, policies and procedures and even the level of good governance displayed by management. Business strategies are also studied and great care is taken to ensure that the business has reported and recorded all their business dealing. In fact, every aspect of the business that can influence its monetary status can be scrutinized.
Not all organizations are subjected to compulsory auditing. However, many organizations that are exempt also request investigations from time to time. This is often done if the owners of a business suspect fraud or theft. When companies apply for insolvency the creditors or even the court can order an audit. Charities and other non profit organizations sometimes publish auditing reports to show that their dealings are transparent.
The report from an auditor is not necessarily a bill of clean health. It must be remembered that the report covers only a very specific period and it does not include information on any financial matters outside that period. Furthermore, auditors can only examine records that are presented to them. If information is withheld, the report may not be a true reflection of the finances of the company.
It is important to choose an auditor that operates independently and that has a reputation for objective reporting. No auditor can produce a valid report unless all records and documentation is made available for scrutiny. Many businesses prefer to use the same auditor year after year, because a long term relationship allows the auditor to report with full cognizance of the history of the business.
Many employees see an auditor as a sinister person that is intent on catching thieves and on pointing out mistakes. The role of the auditor is simply to report on the status of the organization and upon its record keeping and accounting practices. If they find discrepancies, they report them to their clients and in some cases they may warn about dubious practices.
One just has to look at the large number of fraud and theft cases that end up in court to realize that auditing is vital. Modern fiscal systems are sophisticated and it is vital to have measures in place that will make it difficult to commit fraud or theft. Auditing also allow the authorities to make sure that the laws governing the finances of a business are honored.
Auditing is always conducted by an independent professional that has no ties to the organization that is being audited. The professional examines all the records of the organization and then produce a report. The report includes explanatory notes and a summary of the accounting policies of the organization. Normally, the report is presented as part of the annual report of the organization and in many cases it becomes available for scrutiny by the general public.
The auditor is empowered to examine all aspects of the business. This includes each and every transaction, policies and procedures and even the level of good governance displayed by management. Business strategies are also studied and great care is taken to ensure that the business has reported and recorded all their business dealing. In fact, every aspect of the business that can influence its monetary status can be scrutinized.
Not all organizations are subjected to compulsory auditing. However, many organizations that are exempt also request investigations from time to time. This is often done if the owners of a business suspect fraud or theft. When companies apply for insolvency the creditors or even the court can order an audit. Charities and other non profit organizations sometimes publish auditing reports to show that their dealings are transparent.
The report from an auditor is not necessarily a bill of clean health. It must be remembered that the report covers only a very specific period and it does not include information on any financial matters outside that period. Furthermore, auditors can only examine records that are presented to them. If information is withheld, the report may not be a true reflection of the finances of the company.
It is important to choose an auditor that operates independently and that has a reputation for objective reporting. No auditor can produce a valid report unless all records and documentation is made available for scrutiny. Many businesses prefer to use the same auditor year after year, because a long term relationship allows the auditor to report with full cognizance of the history of the business.
Many employees see an auditor as a sinister person that is intent on catching thieves and on pointing out mistakes. The role of the auditor is simply to report on the status of the organization and upon its record keeping and accounting practices. If they find discrepancies, they report them to their clients and in some cases they may warn about dubious practices.
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