The one thing that all legal entities have in common is that they deal with money. In many instances, this money belongs to investors or the tax payer. In other cases the organization administers the money on behalf of the public, as is the case with charities. It is vital to make sure that the funds of an organization are managed honestly, fairly and within the framework of the law. That is why financial audits are so important.
The need for formal auditing of the fiscal dealings of organizations can be ascribed to several factors. The economic environment can be extremely complex and unscrupulous operators can easily defraud the organization if they know that there are no or very few controls in place. It is also necessary to ensure that all organizations comply with the laws.
An auditor is a highly trained professional that is experienced in examining the records of an organization. This expert is never attached to the organization being examined in any way. Only somebody totally independent will be able to produce an objective report. In most cases, the report, together with notes from the auditor, is included in 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.
Many businesses and other organizations submit to auditing voluntary. Non profit organizations, for example, often only qualify for grants or donations if they are able to provide proof that they are able to manage their funds responsibly. Business owners may need an independent report in order to tender for large contracts or when they are trying to attract new investors.
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.
Choosing an auditor should be done carefully. Many organizations have long term relationships with their chosen auditors. In this way the reports produced are based upon a long period of intimate knowledge about the affairs of the organization. Auditors are required to be licensed and registered before they are allowed to practice. An audit can only be accurate if all relevant documents are made available freely and transparently.
Many employees see an auditor as a sinister person that is intent on catching thieves and on pointing out mistakes. The role of the auditor is simply to report on the status of the organization and upon its record keeping and accounting practices. If they find discrepancies, they report them to their clients and in some cases they may warn about dubious practices.
The need for formal auditing of the fiscal dealings of organizations can be ascribed to several factors. The economic environment can be extremely complex and unscrupulous operators can easily defraud the organization if they know that there are no or very few controls in place. It is also necessary to ensure that all organizations comply with the laws.
An auditor is a highly trained professional that is experienced in examining the records of an organization. This expert is never attached to the organization being examined in any way. Only somebody totally independent will be able to produce an objective report. In most cases, the report, together with notes from the auditor, is included in 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.
Many businesses and other organizations submit to auditing voluntary. Non profit organizations, for example, often only qualify for grants or donations if they are able to provide proof that they are able to manage their funds responsibly. Business owners may need an independent report in order to tender for large contracts or when they are trying to attract new investors.
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.
Choosing an auditor should be done carefully. Many organizations have long term relationships with their chosen auditors. In this way the reports produced are based upon a long period of intimate knowledge about the affairs of the organization. Auditors are required to be licensed and registered before they are allowed to practice. An audit can only be accurate if all relevant documents are made available freely and transparently.
Many employees see an auditor as a sinister person that is intent on catching thieves and on pointing out mistakes. The role of the auditor is simply to report on the status of the organization and upon its record keeping and accounting practices. If they find discrepancies, they report them to their clients and in some cases they may warn about dubious practices.
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