Name of the WriterName of the instructorAudit

Audit

INTRODUCTION

Audit is a basically an examination and a review of the financial statement that have been prepared by the management at the end of the financial period. The primary function of an audit is to verify the accuracy and completeness of the accounts. Audit is performed by the auditors' in order to enhance the confidence of the business stakeholders. Auditors are appointed by the audit committee which is selected by the board of directors of the company.

Auditors ensure that the financial statements are free from material errors by providing the audit report after the completion of the audit which has been signed by the senior partner of the audit firm then by the directors of the company.

However, the following paper will discuss on whether audits in today's business environment really add value to the business and its share holders or are just a mandatory burden for the organization. The limitation of audits and the role of expectation gap will also be discussed in these pages.

Discussion

There are two types of audit that is performed in a company. That includes:

EXTERNAL AUDIT

External audit is a self-governing body which resides external of the organization in which it is providing its services. External auditors are appointed by the share holders of the company. The responsibilities of an external auditor is to express an opinion on the financial statements prepared in accordance with international standard and are free from material misstatements.

INTERNAL AUDIT

Internal auditors are employees of the company and perform appraisal activity within an entity as a service to it. They are recruited by the audit committee for the best interest of the company. The main objective of the internal auditors is to identify and analyse all the major risks threatening the organisation and communicate their findings.

In some countries, it is mandatory by law that the accuracy of the companies either public or private should by examined by a reliable, appropriate procedure. This procedure is known as statutory audit. In simple words, it can be defined as a procedure through which an organizations financial position and performance is examined and made sure that these statements and information are giving true and fair view

Statutory audit is compulsory for the listed companies by company Act, however, it is not mandatory for private companies to expense out a huge amount of money for audit their accounts and records. It is up to their choice to add value to their business by electing auditors to review their accounts and financial transactions for their accuracy and true and fair view. Small and medium-sized companies and limited liability partnerships may not qualify for audit under UK regulations. Shareholders have the right to elect statutory auditors to conduct an audit. Bank, insurance companies and brokerage firms have compulsory required to conduct statutory audit (.reuters.com).

When the private company is going to be listed in stock exchange it is required by Companies Act 1985 to conduct statutory audit annually to gain shareholders confidence on companies financial position and performance.

Why express an opinion on the truth and fairness ...