The word “AUDIT” is derived from a latin word “AUDIRE” which means ‘to hear‘, because in earlier times the auditors were used to hear the reports and checked the organistions personnel.
Now, The word AUDITING means a systematic and fair examining of the documents, papers or in financial term we say books of a firm so that a proper idea can be taken out about how far the financial statements present are good and depict a clear picture of the organisation in front of the world.
It also make sure that the financial statements are well maintained by the concern as required by the law. Today, Auditing has become a very widespread process in corporate and public sector. The auditor perceives and recognizes the propositions before him/her for examination, obtains evidence, evaluates the same and formulates an opinion on the basis of his judgement which is communicated through his audit report.
In today’s world financial frauds have increased many folds and many entities had tried to cheat people and others to have financial and personal gains. Therefore auditing has become a legal requirement for all the firms who has the power to ruin financial data for excess gains.
A financial audit helps to gain information about the internal control of a firm and it also ensures reliability of the existing system. Here, a third party named as auditor is appointed to have a look to the books of accounts and give opinion accordingly.
External Auditor– An independent firm/individual that takes a look at the financial statements and provide an opinion on whether the books are fine and free from any fraud or error or not.
Cost Auditor– An n independent firm/individual appointed subject to cost audit to express an opinion on whether the cost sheets of the firm are free from any misstatements or not.
We have certain types of special audits-
1) Forensic audit- It is also known as forensic accounting, here an accountant who is specialised in this field is used to uncover frauds related to missing money, Misguiding statements etc.
2) Energy audits- As name sugget it is the analysis related to the energy flow in a building, try to reduce energy input by not affecting the output.