There are many different laws that govern the way in which organizations have to manage their funds. Organizations are held responsible for the proper management of the funds entrusted to them by the government, by investors or by shareholders. Financial audits are used as an instrument to examine the ways in which an organization manages its funds. Almost all organizations, including non profit organizations and charities are required to undergo regular fiscal examinations.
Auditing is necessary because there is a need to have checks and balances in place. If this is not the case, the organization is vulnerable to fraud and theft. Irresponsible management of money can cost businesses dearly and it is vital that they are able to recognize problems before they become serious. The authorities also need to be reassured that all relevant laws are observed.
Auditors are independent professionals that have no ties with the organization being audited. The main task of the auditor is to scrutinize all the records of the organization and to produce a report on the accounting practices followed by the company. In most cases there are also explanatory notes. This report is then generally made available by being included as part of the annual report of the organization.
The report produced by an auditor is really nothing but an account of the financial position of the organization. In order to produce the report, all transactions are examined. Macro issues such as good governance and the aptness of business strategies are also studied. The auditor can examine any issue that may have an influence on the fiscal status of the business and he has to make sure that the accounting practices are sound.
Sometimes even organizations and businesses that are not legally required to do so also hire the services of an auditor. In some cases the owners of a company suspect theft or illegal dealings. Many charities submit to auditing because they need to show their patrons that they are handling their funds responsibly. In bankruptcy cases the applicant is also often required to be investigated by an auditor.
The report from an auditor is not necessarily a bill of clean health. It must be remembered that the report covers only a very specific period and it does not include information on any financial matters outside that period. Furthermore, auditors can only examine records that are presented to them. If information is withheld, the report may not be a true reflection of the finances of the company.
It is important to choose an auditor that operates independently and that has a reputation for objective reporting. No auditor can produce a valid report unless all records and documentation is made available for scrutiny. Many businesses prefer to use the same auditor year after year, because a long term relationship allows the auditor to report with full cognizance of the history of the business.
Auditors are not focused upon exposing their clients. They are responsible to report honestly and objectively about the status of the client. If they discover anything untoward, they report to their client, who must then take appropriate steps. In some cases, especially where criminal activity is found, auditors are required to report to the authorities.
Auditing is necessary because there is a need to have checks and balances in place. If this is not the case, the organization is vulnerable to fraud and theft. Irresponsible management of money can cost businesses dearly and it is vital that they are able to recognize problems before they become serious. The authorities also need to be reassured that all relevant laws are observed.
Auditors are independent professionals that have no ties with the organization being audited. The main task of the auditor is to scrutinize all the records of the organization and to produce a report on the accounting practices followed by the company. In most cases there are also explanatory notes. This report is then generally made available by being included as part of the annual report of the organization.
The report produced by an auditor is really nothing but an account of the financial position of the organization. In order to produce the report, all transactions are examined. Macro issues such as good governance and the aptness of business strategies are also studied. The auditor can examine any issue that may have an influence on the fiscal status of the business and he has to make sure that the accounting practices are sound.
Sometimes even organizations and businesses that are not legally required to do so also hire the services of an auditor. In some cases the owners of a company suspect theft or illegal dealings. Many charities submit to auditing because they need to show their patrons that they are handling their funds responsibly. In bankruptcy cases the applicant is also often required to be investigated by an auditor.
The report from an auditor is not necessarily a bill of clean health. It must be remembered that the report covers only a very specific period and it does not include information on any financial matters outside that period. Furthermore, auditors can only examine records that are presented to them. If information is withheld, the report may not be a true reflection of the finances of the company.
It is important to choose an auditor that operates independently and that has a reputation for objective reporting. No auditor can produce a valid report unless all records and documentation is made available for scrutiny. Many businesses prefer to use the same auditor year after year, because a long term relationship allows the auditor to report with full cognizance of the history of the business.
Auditors are not focused upon exposing their clients. They are responsible to report honestly and objectively about the status of the client. If they discover anything untoward, they report to their client, who must then take appropriate steps. In some cases, especially where criminal activity is found, auditors are required to report to the authorities.
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