What is an Audit?
Audit stands for scrutiny, examination or inspection of various account books to ensure a standardized method is followed by all the departments of the firm to record transactions and to determine the accuracy of financial statements provided by the organisation. The process is either taken up by the internal employees or departmental heads or even an independent external auditor. The underlying idea is to ensure that fair practices are followed to maintain all the books of accounts and there is no misrepresentation or fraud. All listed firms in public sector have to get their accounts audited by an independent auditor before the quarterly results are declared.
Audits in India are done by Chartered Accountants from ICAI i.e. Institute of Chartered Accountants of India.
An audit is conducted in 4 steps:
- Defining role of the auditor and his terms of engagement
- Planning the audit which includes details of the deadlines and the departments to be covered by the auditor.
- Compilation of all the information about the audit.
- Final step if the reporting of the results of the same.