Four Primary Objectives of Audit
The objectives of an audit are also known as the initial goals of the auditing. They are usually as follows: verifying post-entry processing, checking accounting accuracy of financial records, auditing process followed by management, detecting fraud, identifying cost and performance issues, checking the functioning of internal control, etc. There is a great need to understand the purpose of auditing in terms of these primary objectives. This helps to understand what the auditor's role and responsibilities are. It can also help to decide whether it makes sense to continue with the auditing or whether it makes sense to discontinue it.
Objectives of an audit examination are primarily concerned with the quality assurance of an organization's financial statements. The objective of this audit can be very broad or very detailed - it may only be concerned with certain areas or performances that the auditor observes and verifies.
There are various objectives of an audit and they are very important to determine the overall value of the services provided by the auditor. The various objectives of an audit can include, among others, ensuring that the effectiveness and efficiency of internal control measures are maintained, ensuring accurate data entry, detecting fraudulent transactions and activities, and ensuring correct presentation, format, documentation, and records of financial documents. Auditors also inspect documents relevant to the preparation of financial statements such as balance sheet reports, statement of financial condition, and statement of cash flow among others.
It is the responsibility of an auditor to prepare an inspection report on the company that includes, at a minimum, five high-level overviews of the organization. These are identified by the auditor as being relevant to the preparation of financial statements. The first objective of an audit is to detect and report problems and inconsistencies with respect to the preparation of financial statements.
The second objective of an audit is to examine the nature and status of a company's financial documents as compared to the requirements and procedures required by applicable laws, regulatory frameworks, and best practices within the industry. The third objective is to examine and review the accounts and financial statements of the company for validity, completeness, and accuracy. These objectives are also aimed at ensuring that a company has adequate systems in place to ensure the proper recording, identification, and transfer of accounting data.
In order to achieve these objectives, an auditor must employ the appropriate techniques, processes and procedures as stipulated by law, including the use of established criteria. The use of established criteria is essential to ensure an audit's validity. These criteria have been established by the GAAP (Generally Accepted Accounting Principles). These guidelines allow auditors to draw conclusions based on the information they receive and on the basis of their interpretation of facts. These criteria are also used by the courts when deciding on disputes and cases.
Internal and External controls refer to the controls a company has in place to ensure the protection of assets, the identification of risks, and the preparation and maintenance of financial statements and reports. Control systems may include internal controls as well as external controls.
Internal controls refer to those measures that are in place within the organization to ensure the protection of assets. They also include the supervision of employees, timely detection of events or occurrences that could affect the value of a company's assets, and the reporting of suspicious activities to authorized personnel. On the other hand, external controls refer to the measures you resort to when you come in contact with external customers, suppliers or governments. With external controls, the company ensures the security of its transactions with them, as well as their information.
The fourth primary objective of an audit is the identification of material misstatements or false/missing information. In this case, the auditor will verify whether there has been a material misstatement made in the financial statements or any other information relating to the audit.
Other objectives of an audit may also include ensuring compliance with regulatory requirements, the maintenance of accurate records, and ensuring that the procedures followed by your company conforms to legal requirements. Material misstatements or false/missing information can have a major impact on the overall efficiency of your company.
