What is Auditing? Types of Audit and its Importance

Sara Abadi

, Finance

Every business firm or non-profit organization needs to make use of accounting and auditing so that they have a clear idea about their finances and profit margins. While accounting deals with the broader aspects of financial activities carried out by an organization, auditing is related to a specific aspect of accounting. With auditing, it is possible to examine the financial records and accounts closely. To maintain optimum accuracy at every step of the way, auditing of accounts must be carried out independently. It helps to make sure that the business firm has performed its accounting tasks according to the laws relevant to it and the commonly accepted accounting principles have been followed.

The accuracy of all accounting activities can be verified with the help of auditing. The processes of auditing also help to determine the reliability and integrity of accounting systems implemented by a company. Therefore, it is vital that you have your business’s financial statements assessed annually even if you are a public sector company or a non-profit organization. This can definitely enhance the credibility of your commercial organization. Hence it is always a good idea to make use of auditing services even when they are not compulsory for the organization.

Types of Auditing

There are many different types of auditing used these days for the evaluation of the accounting activities. Let’s have a look at some of them.

  1. Internal Audit

    Internal audits are carried out within your organization. Since you own a business venture, it is important for you to analyze the whole audit system so that another individual inside your organization can carry it out. Industries having a board of directors and members as well as shareholders may execute internal assessments as they can update them regarding the finances of their commercial activities.

    Internal audits also work as excellent ways to report on the financial areas. With the help of internal audits, you can be certain of the fact that your organization is thoroughly acquiescent with the protocols and decrees. You can also implement accounting improvements, boost effectiveness, examine the operational processes, assess and authenticate the financial details and also come up with measures and strategies of risk management.

  2. Compliance Audit

    The compliance audit is meant for studying the plans and actions of your business to determine whether they are in line with the stipulated external and internal standards. Such an auditing process can also be used to check whether your employees get their due payments properly and if you are able to meet the shareholder distributions. Compliance audits are also vital to validate that your occupational body follows the IRS regulations.

  3. External Audit

    These audits are performed by some third-party establishments, like an accredited tax firm, a specialized accountant or the IRS. This external assessor does not have any association with your commercial undertaking and they should also follow the GAAS or universally accepted auditing ideals. The foremost purpose is to scrutinize accounting precision. Very often, financiers and investors ask for external audits for making sure that the statistics and information presented by an organization in relation to its finances are fair and exact. Audited files and reports are presented by external auditors that clearly describe the accounting information of a company. The audit reports comprise of all the particulars of the auditing procedure found by the external auditors.

  4. Financial Audit

    This kind of audit is usually carried out externally wherein the auditor checks for the meticulousness of the monetary statements of a business. The auditors review the activities, dealings, and equilibria of the organization. Following the definite auditing procedure, the assessor presents a report to the investors, financiers, stockholders, and creditors.

  5. Operational Audit

    Such audits are directed for analyzing the goals and measures of your business organization. It helps in studying your planning courses as well as operational outcomes. This kind of audit can be carried out internally as well as externally. It is carried out with an aim to improve the functioning of the commercial firm.

  6. IRS Tax Audit

    It assists in determining the accurateness of tax returns filed by your establishment. The auditors primarily look for inconsistencies and inaccuracies in the tax liabilities so as to ensure that your firm did not underpay or overpay the taxes. Tax auditors can also scrutinize faults on tax returns of your small commercial undertaking. The IRS audits are commonly directed randomly. This can be carried out through electronic mail or direct face to face interviews.

  7. Payroll Audit

    The payroll audits are proposed to manage the payroll processes of a business and maintain its accuracy. People who perform payroll audits carefully analyze the employee information, pay rates, tax coverups, and remunerations. The payroll audits are led within the organization. Carrying out internal payroll audits can prevent the need for external audits. Companies should perform internal payroll audits on an annual basis to regulate errors in payroll processes so that they can remain compliant with the laws.

  8. Information System Audit

    It is mainly carried out by software and information technology (IT) related establishments. The administrators perform audits for finding issues associated with facts dispensation, software development and different kinds of computer arrangements. It presents correct data to the users and prevents unlawful parties from having any entree to critical remote data. Such audits are meant to secure a company from security breaches and hacking attempts.

  9. Pay Audit

    Pay audits are intended to analyze any kind of discrepancies of payments among the employees. It detects differing and unequal payments. These audits can evaluate if the discrepancies in expenditures are due to “gender, race, creed, and age.

Importance of Auditing

Here are some of the major benefits of auditing.

  • Getting auditing solutions for your company can provide you with a thoroughly detailed overview of your business and the way it functions. In many cases, business owners may inadvertently overlook some weak areas in their conducting of business. Such issues can be resolved with the help of auditing.

  • In many cases, you need to have a fresh perspective on your business by looking at it from a different angle. An auditor can provide you with a report that can help you to do just that. The auditor can let you know if your business is yielding with the rules and regulations or if you need to make some changes in the way you conduct your business.

  • Getting auditing solutions is an excellent way to enhance the credit rating of your corporation or business firm. This can enable you to have financial support from banks and other financial organizations and attract investors when you need them.

    See Also: 17 Best Insurance Brokers in Dubai

Best Account Auditing Companies in Dubai

  1. Abacus Accounting & Auditing
    Abacus Accounting & Auditing offers excellent support for multinational companies and can provide excellent auditing solutions.

  2. ACS Majdi Auditing of Accounts
    ACS Majdi is a renowned accounting and auditing company known for its in-depth and dynamic solutions that are vital for businesses in Dubai.

  3. Affiniax AAS Auditors
    Affiniax AAS Auditors offers impeccable tax auditing solutions along with tax services and consulting expertise.

  4. Al Ansari Accounts & Auditing
    Al Ansari Accounts & Auditing has been delivering highly accurate auditing services for a long time in Dubai.

  5. Al Maqtari Auditing
    Al Maqtari Auditing company offers an extensive range of auditing services for its clients in Dubai.

So once you have determined that you need auditing services, make sure that you visit DCCIINFO, a leading online business directory to find reliable auditors in Dubai.