Every year, during or after the financial year of companies in all the sectors go through an audit conducted by the audit of that specific domain, sometimes audits are conducted twice a year. The prime motto of auditing is to find out the accuracy of the financial accounts and functions any company has performed throughout the year. The auditors examine the authenticity between the accounting books and documents submitted by a firm.
Types of Audit Programme –
1. Financial Audit –
The most general that takes place every year in the organizations of all the sectors is Financial Audit. The auditors check the financial books of a company to find out the transparency in transitions that have taken place between a company and other internal or external bodies.
2. Internal Audit –
In internal audits, the employees are appointed by a firm internally to conduct audits and check the balance sheets and their authenticity. The companies conduct internal audits according to their feasibility like some may conduct once in a month and some may conduct audits once every three months. These internal audits are conducted with the purpose of finding out the way the company is functioning to achieve its objectives, also to find out the improvisations needed in a company and the risk factors that may arise in the future.
3. External Audit –
During external audits, the auditors will be a person or board of members of external bodies. It may be conducted by official auditors, accountants, or tax officers. External Audit will be conducted in every financial year to examine the accounts and business actions executed by the companies.
4. Tax Audit –
The tax audit is conducted to check the tax returns paid or submitted by the companies. Also is the firm paying the right amount of tax according to the company’s revenue and profit.
5. Compliance Audit –
To check the policies and procedures followed by a company is complying with the regulatory standards, compliance audits are conducted. To check how a company and its employees are following the policies and procedures to attain the organizational goal.
Importance of Auditing
The process of auditing is very important to any company offering products and services in any industry. Directly or indirectly the future of a company relies on the results of auditing. The internal audits help companies to find the plan and procedures followed by their employees to complete the objectives, also if any improvisations are needed. It also assists to avoid risk factors that a company may face in its upcoming days. External Audit helps a company to maintain authenticity in the industry also to know its position in the market. Also, by conducting audits the superior bodies or government will get aware of any illegal is carried out in a company by its employees or by the owner. And if, any employee or proprietor thinks of taking part in any illegal activities they make try to stop being part of such activities when they are completely alert about the audits that will be conducted by the external party.
Audit Programme Preparation-
Before conducting an audit, either internal or external, a company and all the departments in it should be well prepared for the audit. How to be well prepared for the audit? The steps are mentioned below –
1. Before any external or any other audits conducted by any external person or board of audit, a company should resolve its entire loopholes that were found out during the internal audits. If an internal audit is conducted before an external audit it will help the companies to know the organizational situation.
2. The board members of a company should make aware of their employees about the plans and procedures to be followed before and during the audit. They should discuss and organize meetings with employees to make them understand the importance of audits.
3. The most important factor to focus before any audit is, whether the documents and files are updated with the companies closed and ongoing projects or clients. And mainly the financial accounts should be accurate with the transactions that have happened in a company with its clients or any other expenses. Also, the procedures and policies followed by its employees to achieve the organizational objectives.
4. Any company has to provide true and authentic files or documents to the auditors so that the process of auditing is done without any complications.
The easy and best way to be well prepared before the audits are, by writing down or recording the information on the audit process that has happened in the previous years. If a company is facing an audit for the very first time it may take suggestions or consult an expert in this arena.