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AUDIT & ASSURANCE
AUDIT & ASSURANCE
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AUDIT & ASSURANCE
Audit and assurance are crucial components of financial and business management that ensure the integrity and reliability of financial information.
AUDIT
An audit is an independent examination of financial information of any entity, whether profit-oriented or not, regardless of its size or legal form. This examination is conducted with the purpose of expressing an opinion on the financial information. Here are some key points:
1. Purpose: The main goal of an audit is to form an opinion on whether the financial statements present a true and fair view of an entity’s financial position and performance. This is essential for maintaining transparency and accountability.
2. Types of Audit: –
External Audit: Conducted by independent auditors (external auditors) who are not employees of the entity. It provides an unbiased evaluation of the financial statements.
Internal Audit: Carried out by the internal audit department within the organization. It focuses on risk management, internal controls, and governance processes.
3. Standards: Audits are conducted in accordance with specific standards such as International Standards on Auditing (ISA) or Generally Accepted Auditing Standards (GAAS).
4. Process: Typically involves planning, risk assessment, execution of audit procedures, gathering of audit evidence, and forming an opinion. entity, whether profit-oriented or not, regardless of its size or legal form. This examination is conducted with the purpose of expressing an opinion on the financial information. Here are some key points:
Assurance
Assurance services are independent professional services that enhance the quality and relevance of information for decision-makers. Although audits fall under assurance services, not all assurance services are audits. Here are the key aspects:
1. Purpose: Assurance serves to give users confidence in the reliability and credibility of information.
2. Types of Assurance Services: –
Audit: Offers a high level of assurance (reasonable assurance) on financial statements.
Review Engagements: Provides a moderate level of assurance (limited assurance) with a narrower scope than an audit, often involving inquiries and analytical procedures.
Agreed-upon Procedures: Involves specific procedures agreed upon by the auditor and the client, resulting in a report based on factual findings without providing an opinion or assurance.
Compliance Assurance: Ensures adherence to external regulations or internal policies.
3. Standards: Assurance services are provided in accordance with frameworks such as the International Framework for Assurance Engagements.
4. Process: The process varies depending on the type of assurance engagement but generally involves understanding the subject matter, criteria, procedures, and evidence gathering.
IMPORTANCE
Credibility: Enhances the credibility and reliability of financial information provided to stakeholders.
Trust: Builds trust among investors, creditors, and other stakeholders.
Risk Management: Helps in identifying and managing risks within an organization.
Compliance: Ensures compliance with laws, regulations, and internal policies.
Decision-Making: Provides reliable information that aids in better decision-making by management and stakeholders.