What is Auditing

An audit is the inspection of the financial report of an organization – as presented in the annual report – by someone independent of that organization. The financial report includes a balance sheet, an income statement, a statement of changes in equity, a cash flow statement, and notes comprising a summary of significant accounting policies and other explanatory notes. The purpose of an audit is to form a view on whether the information presented in the financial report, taken as a whole, reflects the financial position of the organization at a given date.

An auditor is a person or a firm assigned to perform an audit on an organization. An audit is a structured, methodical process that includes an examination of books, accounts, records, or various documents. The audit can be on any topic. However, from a financial perspective, an auditor will examine the financial statements of an organization. The auditor performs the examination in order to confirm that all reports are accurate and documents are free from misstatement. Misstatements can take place when the financial statements are incorrect due to fraud or error.