Audit
Noun:
1. an official examination and verification of accounts and records, especially of financial accounts.
2. a report or statement reflecting an audit; a final statement of account
Verb:
1. To make an audit of; examine (accounts, records, etc) for purposes of verification: The accountants audited the company’ books at the year of the fiscal year.
2. To examine and verify an account or accounts by reference to vouchers.
British dictionary definition for audit
Noun: an inspection, correction and verification of business accounts, conducted by an independent qualified accountant
Verb: to inspect, correct and certify (accounts, etc)
Word origin and history for audit
Early fifteenth century, from Latin auditus “a hearing”, past participle of audire “hear” (see audience (browse/ audience)). Its involved an official examination of accounts, which originally was an oral procedure.
Definition
An Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following a documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation.
Description
An Audit can be done internally by employees or heads of a particular department and externally by an outside firm or an independent auditor. The idea is to check and verify the accounts by an independent authority to ensure that all books of accounts are done in a fair manner and there is no misrepresentation or fraud that is being conducted.
It should be noted that now there are many different types of audits (we will cover these in our next EAlert).
Mandatory audits
Under s.45A of the Corporation Act if you are defined as a large proprietary company then your accounts must be audited.
All public listed entities have to get their accounts audited by an independent auditor before they declare their results for any quarter.
Other audits
Small and Medium Enterprises where there are shareholders or directors from different families will often want their accounts audited.
Subsidiaries of overseas parents who are not large proprietary companies will often have their accounts audited.
Many non-profit organisations must have their accounts audited.
Professional service firms such as Accountants, Solicitors, Real Estate Agents, etc who hold money in trust must have their Trust Accounts audited.
The 4 steps in the audit process
There are four main steps in the auditing process. The first one is to define the auditor’s role and the terms of engagement which is usually in the form of a letter which is duly signed by the client.
The second step is to plan the audit which would include details of deadlines and the departments the auditor would cover. Is it a single department or whole organisation which the auditor would be covering?
The audit could last a day, a week or even weeks depending upon the nature of the audit.
The next important step is compiling the information from the audit. When an auditor audits the accounts or inspects key financial statements of a company, the findings are usually provided in a report or compiled in a systematic manner.
The last and most important element of an audit is reporting the result. The results are documented in the auditor’s report.
Need help with an Audit? Our auditors can assist, please contact The Quinn Group on (02) 9223 9166 or submit an online enquiry.
