The one thing that all legal entities have in common is that they deal with money. In many instances, this money belongs to investors or the tax payer. In other cases the organization administers the money on behalf of the public, as is the case with charities. It is vital to make sure that the funds of an organization are managed honestly, fairly and within the framework of the law. That is why financial audits are so important.
The need for formal auditing of the fiscal dealings of organizations can be ascribed to several factors. The economic environment can be extremely complex and unscrupulous operators can easily defraud the organization if they know that there are no or very few controls in place. It is also necessary to ensure that all organizations comply with the laws.
Auditors are independent professionals that have no ties with the organization being audited. The main task of the auditor is to scrutinize all the records of the organization and to produce a report on the accounting practices followed by the company. In most cases there are also explanatory notes. This report is then generally made available by being included as part of the annual report of the organization.
In essence, the report produced by the auditor reflects the financial position of an organization at a given date. The investigations of the auditor can reach almost all levels of the organization, including the quality of management practices and the aptness of short and long term business strategies. The auditor also examines the measures that are in place to ensure proper accounting practices.
Sometimes even organizations and businesses that are not legally required to do so also hire the services of an auditor. In some cases the owners of a company suspect theft or illegal dealings. Many charities submit to auditing because they need to show their patrons that they are handling their funds responsibly. In bankruptcy cases the applicant is also often required to be investigated by an auditor.
It is important to understand that the report produced by an auditor is based upon the documentation and records that have been made available to him. The auditor also cannot realistically examine every single document because this will simply take too long. The report is therefore based upon a selective process. Of course, the audit also covers a very specific time frame and the report does not reflect any financial dealings outside that time frame.
When requiring the services of an auditor it is important to choose a professional that operates independently. It is also vital to make sure that he is registered and properly licensed, as required by the various laws governing the finances of organizations. It is critical to make sure that all relevant information is made available. If this is not done the final report may be inaccurate.
Auditors are not focused upon exposing their clients. They are responsible to report honestly and objectively about the status of the client. If they discover anything untoward, they report to their client, who must then take appropriate steps. In some cases, especially where criminal activity is found, auditors are required to report to the authorities.
The need for formal auditing of the fiscal dealings of organizations can be ascribed to several factors. The economic environment can be extremely complex and unscrupulous operators can easily defraud the organization if they know that there are no or very few controls in place. It is also necessary to ensure that all organizations comply with the laws.
Auditors are independent professionals that have no ties with the organization being audited. The main task of the auditor is to scrutinize all the records of the organization and to produce a report on the accounting practices followed by the company. In most cases there are also explanatory notes. This report is then generally made available by being included as part of the annual report of the organization.
In essence, the report produced by the auditor reflects the financial position of an organization at a given date. The investigations of the auditor can reach almost all levels of the organization, including the quality of management practices and the aptness of short and long term business strategies. The auditor also examines the measures that are in place to ensure proper accounting practices.
Sometimes even organizations and businesses that are not legally required to do so also hire the services of an auditor. In some cases the owners of a company suspect theft or illegal dealings. Many charities submit to auditing because they need to show their patrons that they are handling their funds responsibly. In bankruptcy cases the applicant is also often required to be investigated by an auditor.
It is important to understand that the report produced by an auditor is based upon the documentation and records that have been made available to him. The auditor also cannot realistically examine every single document because this will simply take too long. The report is therefore based upon a selective process. Of course, the audit also covers a very specific time frame and the report does not reflect any financial dealings outside that time frame.
When requiring the services of an auditor it is important to choose a professional that operates independently. It is also vital to make sure that he is registered and properly licensed, as required by the various laws governing the finances of organizations. It is critical to make sure that all relevant information is made available. If this is not done the final report may be inaccurate.
Auditors are not focused upon exposing their clients. They are responsible to report honestly and objectively about the status of the client. If they discover anything untoward, they report to their client, who must then take appropriate steps. In some cases, especially where criminal activity is found, auditors are required to report to the authorities.
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