“The main objective of an audit is to examine the financial statements of an entity to make sure that information provided in the financial statements represents the true and fair view of the entity performance”. Audit Definition helps to understand the objective of the audit function in a company for the stakeholders. Because they can misunderstand their role or what is an audit? The process can be performed by internally and externally both.
The most important audit is external because it is required by the law or statutory requirement in the Limited companies. The internal audit is performed to find out the loopholes in the entities process and improve them. External Auditors increase the stakeholder’s confidence in the company that the information provided to them is true and fair. Having an internal audit department is also a plus point for the company which helps to increase the stakeholder’s confidence in the company. So they can make their decision according to the given information and invest more in the company. Most of the companies conduct their audit annually, but it is also possible that large companies received a monthly audit. In some companies, the audit is the legal requirement.
Types of the auditors
Internal audit department employees are the company employees and get salaries on monthly basis. The internal audit departments provide information to the managers, board of directors and sometimes the stakeholders too.
External auditors are not working internally, these auditors are used when the company doesn’t have the in-house expertise.
Oversight, Rules, and Regulation
In the United States as in many other countries, an audit has to meet a general set of accepted standards as established by their respective governing bodies.
Standards for external audits, called the Generally Accepted Auditing Standards (GAAS) are set out by the American Institute of Certified Public Accountants. A separate set of International standards called the International Standards on Auditing were set up by the International Auditing and Assurance Board.
Rules for audits of public companies are made by the PCAOB, the Public Company Accounting Oversight Board established in 2002.