If accounting is considered as the lifeline of a business, auditing ensures it is transparent as well as healthy. Auditing in a traditional or typical language is checking and authenticating the transaction records managed by the company. This is to ensure that there are no frauds, misappropriation of amount, duplications of transaction or amount etc. It is a process where each cash transaction will be cross verified with the connected bills or vouchers and ensure the profit or loss has been derived by following correct accounting procedure.

Why auditing?

Many of you might have this question in mind. Auditing doesn’t mean that the company doubts its employees or any fraud has taken place. It is necessary to ensure that there is no error on part of accounting and the profit or loss has been fairly derived. Cross check will be essential for the transactions in a company irrespective of the trustworthiness of the employees.

What to expect?

The meaning of auditing has gradually changed over a period of time and now it is more limited to verifying the balance sheet as well as profit & loss account. There are very few companies that go for detailed auditing of vouchers, bills etc, as it is time consuming. Moreover, these days, the transactions are maintained in an electronic form through software and therefore auditing too happens through it. With the help of software, it is easier to find out the duplicate entries (in most cases the duplicates are not allowed by the software itself), omissions if any, manipulations etc. However, various reports available in the software will be helpful in auditing the transactions and ensure that there are no fraudulent entries that have influenced the profit or loss.

Types of audit services

 The audit service would differ from one company to the other depending upon the volume and need. Some companies hire the auditors for detailed verification of all transactions that have taken place in a quarter or year. Whereas others prefer auditing activity for formality sake and want to verify only the correctness of the balance sheet.

The auditing can be done by the auditors within the company which is known as 1st party auditing. The 2nd party auditing is a process where a person who is interested in the company will carryout the audit. The company may wish to hire an auditor in which case it is called 3rd party auditing. In either case, the auditing is essential for a business in order to ensure everything is running smoothly.