What is auditing?

The term audit refers to the process of examining and evaluating the accounting records and financial statements of a company, with the aim of ensuring their accuracy, integrity and compliance with established laws and government regulations. This is done by a qualified employee of the company or institution itself, or an independent firm of certified public accountants, so that the audit can be conducted internally or externally.

The annual audit of a company's financial accounts, which include the income statement, balance sheet, and cash flow statement, is an essential process for almost all companies and institutions. Investors and shareholders often want to see the results of the external audit once a year, in order to evaluate its performance and profitability and make their future decisions based on that.

Some government agencies and bodies also impose legal regulations and regulatory rules to review this auditing process, with the aim of preventing manipulation of the company’s financial information and data and practicing fraud in any form, especially with the increasing examples of global companies that have already done so. Some companies are even asked to explain the internal controls they have implemented to ensure the integrity of the process.

The International Auditing Standards Board is responsible for creating a variety of international guidelines and rules, which are referred to as International Auditing Standards.

Types of auditing

Internal Audit:

Internal auditing is performed by employees of a company or organization. It focuses on evaluating the effectiveness of internal controls, risk management, and governance processes. The goal of internal auditing is to improve operations, ensure compliance with policies and regulations, and enhance overall efficiency.

External Audit:

An external audit is performed by an independent firm of certified public accountants. It involves examining a company's financial statements to provide an objective opinion on their accuracy and compliance with accounting standards and legal requirements. An external audit is often required by law and provides confidence to shareholders and stakeholders about the financial health of a company.