Audit: Functions, Phases, Types, Features And Characteristics

We explain what an audit is and what its characteristics and objectives are. Also, how it is classified, its importance and the role of the auditor.

What is an audit?

The audit is a verification that is carried out in a company or organization in order to verify the financial situation of the institution, verify its assets and evaluate if the accounting numbers reflect the results that said company has obtained in a certain period of time. .

All audits must be analytical and objective and can be carried out on a voluntary basis by the company or be mandatory when required by another entity or organization.

The audit is carried out by the figure of an auditor , who must have knowledge of the company in terms of infrastructure, operation, internal organization, among other variables. The results of all audits are expressed in a report aimed at a specific audience (which can be internal or external) and with a certain objective .

Characteristics of an audit

Some characteristics of an audit:

  • It is done to know the real financial status of a company.
  • It is done to verify that the accounting data provided by the company is true to its current situation.
  • It makes the balance sheets, accounting books and documents of the company available to be analyzed by the auditor.
  • It is intended that the company complies with accounting standards.
  • It is carried out by an auditor, who can be internal or external to the organization and who must be impartial.
  • It can be requested from the organization or by an external agent on a mandatory basis.
  • Its results are detailed in an audit report.
  • Your results may reflect discrepancies with the information provided by the company.
  • It allows to know the current state of the company to make decisions based on it.

Functions of an audit

Functions of an audit An audit must prioritize actions that optimize the organization.

All audits are intended to provide credibility and assist the company against changes in current legislation in such a way that the organization is in good standing.

Additionally, an audit is useful for:

  • Analyze the processes from the beginning to the end, evaluating the possible risks.
  • Identify areas for improvement.
  • Adjust policies and legal procedures to the framework of the company.
  • Prioritize actions that optimize the organization.
  • Build trust in creditors or partners.
  • Be in good standing with financial and legal regulations.
  • Improve efficient use of resources.
  • Detect fraud.
  • Collect information and data that may be useful for setting objectives or making decisions.

The role of the auditor

The role of the auditor In a partial scope audit only part of the company should be audited.

The auditor is the person (s) who carry out the audit from the beginning of the process to the end . This examiner cannot act influenced by personal matters, but must be completely impartial, to objectively evaluate the company or organization.

Impartiality is the main characteristic that every audit must have and the critical judgment of the auditor must prevail , who must express himself formally and carry out the necessary steps to fulfill the objective of the audit.

Responsibility, honesty, impartiality and confidentiality are some of the values that must be found in an auditor.

Phases of an audit

Phases of an audit The report is the written presentation of all the auditor’s work.

All audits are carried out following an action plan or phases that it is important to respect and comply with. These phases are:

  • Planning . In the first stage of the audit, the purpose of this process and the scope it will have is established. In addition, the duration is determined, who will carry it out and the details and activities that will be developed within the procedure. If it is an external audit, in the planning stage the company is informed about the auditor’s mode of action and how long the audit will last. In this instance, the company can be asked for certain questions that facilitate the auditor’s task, such as access to deposits, accounting material or offices.
  • Execution . All detailed procedures are put in place at the planning stage. Here, notes are taken, documents and files are analyzed, the necessary people are interviewed, processes are reviewed and controlled, among others.
  • Report . With all the material gathered during the audit, the auditor writes a report that includes all the data collected in the process. In this written presentation, all the auditor’s work in the company is established and the shortcomings and achievements of the analyzed area are detailed.

Audit types

Audit types External audits are done by people who do not belong to the audited company.

Audits can be classified based on certain criteria:

  1. According to its origin:
  • Internal audit . It is carried out within an organization to measure its status or performance and control procedures. This type of audit is requested from the company and can be carried out by employees or external auditors.
  • External audit . It is carried out by people outside the company who wish to control whether the regulations in force are complied with.
  1. Depending on what you want to audit:
  • Legal audit . Documentation concerning the tax obligations of a company or entity is presented.
  • Certification audit . It serves to accredit the certification to certain standards and is carried out by a competent body.
  1. According to its scope:
  • Partial scope audit . Only part of the company is audited.
  • Global or total scope audit . The entire company is audited.

Importance of the audit

Importance of the audit An audit should assist the company regarding changes in current legislation.

The audit is a fundamental process that must be carried out within companies or organizations.

On the one hand, it is important to mention that every audit is presented as an X-ray of the accounting and financial situation of the company that is used to compare it with the data provided or recorded in records by the company. The presence of audit reports in a company generates confidence in creditors and potential investors. In addition, it inspires responsibility and confidence in employees.

The audit is also useful for an organization because it allows access to information about the development of the processes , which is useful to detect possible errors and to be able to correct them. It is also used to find out which areas are working properly and use that information to set new goals or make long-term decisions.

The above content published at Collaborative Research Group is for informational and educational purposes only and has been developed by referring reliable sources and recommendations from technology experts. We do not have any contact with official entities nor do we intend to replace the information that they emit.

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