What is an Audit? Why Are They Important?

 Most of us have heard the word super fund audit but we rarely know what it actually means. If you are also trying to understand what an audit is then you are at the right place. An audit is basically an accounting technique in which the financial records of an organization, company or an individual are inspected accurately to ensure that they are precise and accurate.

Most of the the taxpayers fear an Internal Revenue Service smsf online audit, whereas the dishonest organizations fear the independent audits as it may reveal the misuse or embezzlement of their funds. An audit helps in keeping the company honest and also reassures the investors and the employer about the financial condition of the organization in which they are working.

There are basically two types of audits. They are:

* Internal audits
* Independent audits

The audits are usually performed without any partiality.

The internal audits of the company are generally conducted by the accounting department of the concerned organization. It is seen that various companies carry out regular internal audit checks so as to keep different finances in order and to see if the public trading of the company is going smoothly, and also to find out whether the reports are available for inspection by the stockholders.

The external or independent auditing is basically done by the third party like a professional accounting organization that specializes in providing external auditing services.

In both the cases, the financial records of an organization including bank statements, ledgers, tax information, pay rolls, official published reports, internal financial reports, accounts receivable and accounts payable will be scrutinized. At the time of an audit, the records of the company are inspected closely to search for any kind of discrepancies and inaccuracies so that they can be repaired and addressed.

Conducting audits is very important for most companies and organizations. There are many reasons for that.

An audit commonly brings the simplest accounting mistakes into notice. Also, during the time of an audit the sinister issues like misappropriations of funds (if any) are also brought into the limelight. The organizations that are struggling financially usually end up making some wrong financial decisions in order to salvage their organization and such decisions are then disclosed by a very close audit.

It so happens that an audit also discloses if a company on the verge of bankruptcy due to the high misuse of the funds. Examples like WorldCom and Enron will come to mind where such discrepancies were exposed via audits.

Typically when any kind of inaccuracy is disclosed through an independent audit, it is repaired by the auditors in its final report to the company. In few cases, the audit is ordered by an external body like the Exchange Commission who will also receive a copy of the audit report.

So, to sum it up, companies are audited to remove inaccuracies and prevent the misuse of funds available to an organization.



For more Info:-

SMSF Audit Software

SMSF Auditors Sydney

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