Suggest a new Definition Show Proposed definitions will be considered for inclusion in the Economictimes.com Definition: 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 documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation. Description: 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. All the public listed firms have to get their accounts audited by an independent auditor before they declare their results for any quarter. Who can perform an audit? In India, chartered accountants from ICAI or The Institute of Chartered Accountants of India can do independent audits of any organisation. CPA or Certified Public Accountant conducts audits in USA. 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 or even a week 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 put out 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.
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What is an examination of financial statements?A financial statement audit is the examination of an entity's financial statements and accompanying disclosures by an independent auditor. The result of this examination is a report by the auditor, attesting to the fairness of presentation of the financial statements and related disclosures.
What is the term for an examination of a company's financial records by someone that is not an employee of the company?Auditing typically refers to financial statement audits or an objective examination and evaluation of a company's financial statements – usually performed by an external third party.
Which audit is an examination of financial statements?The term audit usually refers to a financial statement audit. A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent.
Who is responsible for preparing a company's financial statements?A company's management has the responsibility for preparing the company's financial statements and related disclosures. The company's outside, independent auditor then subjects the financial statements and disclosures to an audit.
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