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Accounting audit is an activity done by an auditor to examine the financial records of a company with an aim to ensure they’re prepared in accordance with generally accepted accounting principles. This may also deal with the internal process with a focus on mitigating risk and identifying areas where cost savings can be made.
Auditors tend to fall into two main categories, which are the following:
Internal auditor
Large organizations, particularly those in highly regulated industries such as finance and the public sector, tend to hire internal auditors to help them achieve compliance and accountability.
Apart from ensuring the books are balanced and all incomings and outgoings are accounted for, an internal auditor will identify areas where the business can become more efficient, for instance when purchasing supplies for multiple sites.
External auditor
An external auditor also reviews and provides certification on the financial statements of a company. However, unlike an internal auditor, an external auditor does not answer to company management. Instead, the professional reports to stakeholders.
Functions of an accounting audit are as follows:
Monitor company systems - an accounting audit does not only examine whether a company’s every financial statement is accurate but also tests that the companies’ systems are operating as they should. The systems an auditor examines include the company’s internal controls or the measures taken to eliminate accounting errors or fraud. Auditors recommend changes the company should make in its processes or systems to eliminate problems and reduce errors.
Meeting financial goals - companies should always be striving to keep operating costs as low as possible without sacrificing productivity. Companies financial objectives are taken into consideration in accounting audit. Auditors also determine the goals of a company and check if the policies and practices established are being executed as planned. Auditors make suggestions on how a company can make adjustments to its practices and policies to create results that align with goals and objectives.
Difference between accounting and audit
Accounting and audit are different processes, but the terms are often interchanged. The key differences between the two are as follows:
Accounting
Accounting is the process of recording business transactions and the subsequent collection of account balances in the general ledger. The business transactions are analyzed and recorded by accountants. For example, in the case wherein the business purchases a raw material, it is recorded to the inventory account and payment for the purchase is recorded to cash account.
Auditing
As for audit, an auditor identifies and analyzes potential risk factors that may affect a company’s financial position. The auditor has to first gain an understanding of the business and its operating environment before performing any auditing tasks. The auditor can identify business risks that cause material misstatement and assess the likelihood of material misstatement.
Accounting audit services in UAE
Accounting audit establishes credibility with a company's financial information which help shareholders and business owners make informed business decisions. If you’re looking for experts who can perform your audit, seek the help of seasoned auditors in UAE. An audit firms in Dubai with experts that have been working with multiple clients for all their audit needs. Highly qualified auditors in Dubai offer the most significant level of professionalism in all kinds of audit. Auditors will also provide all kinds of audit report.
What is audit cycle?
The audit cycle for a business includes all the steps that auditors, whether internal or external, take to ensure the financial reporting of a company is both valid and accurate prior to the release of any financial statement.
What does audit mean in accounting?
An audit is the examination of a company’s financial and accounting records, as well as the physical inspection of its assets.
What is the purpose of an accounting audit?
The main purpose of an audit is to provide an independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increasing user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital.
What do auditors look for in an audit?
With an audit, auditors test documentation supporting classes of transactions and account balances, confirm accounts receivable with third parties, and understand and evaluate a business' internal control system among others.
What is needed in an audit?
The papers or documents that are needed in an audit service in UAE are copies of previous audit reports, ledgers, financial statements, receipts, bank statements, etc. There are other documents auditors request but not for every audit like company's regulations, board committee meetings, etc.
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