There are few words for an accountant, which cause as much
concern as the word âauditâ. Audits, whether internal or
external, carefully study the accountants work and identify any
errors or abnormalities.
In large firms audits are often used as a control for the work
of the accounting department, in these firms the accounts
departments may deal with millions of dollars a month and without a
control process in place there would be no way of verifying that
the information produced was correct and that the company wasnât
These internal audits can take one of two forms, either being
carried out by the CFO and his team or by a specially commissioned
external firm of auditors. The second option is by far the most
popular as it ensures objectivity in the audit.
In either of these forms, the auditors are responsible for
confirming the validity of the records produced by the accounting
department. This can be done by cross-checking the accounts
workings with the source information, although in larger firms this
can be too time consuming. In these cases statistical sampling,
in which a random sample is checked can provided reasonable proof
These audits may be financial or managerial in nature, in that
they can confirm the workings of the financial accounts or of
The primary function of these audits is to demonstrate that the
company is following all expected standards whether they be
accounting or production. Each department can be audited to confirm
that they adhere to set procedures and to ascertain that each
process is as described.
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