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The nature of an audit

0
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Many people misunderstand the intent of the audit process and focus on fraud or error detection. How can we educate board members, the public and others who rely on the audit on the subject of what an audit is and is not while reinforcing that audits are valuable and important tools for them as they make decisions and plans?

Audit
Fraud
board member
Jill Nowak, CAE, CPA
35 months ago

6 answers

1

Audits also benefit non-financial processes.  I've found them useful for determining weaknesses in a practice or procedure with their results that create a roadmap for improvement. As a risk consultant, I've used them often in specific areas to assist clients with identified weaknesses and provide solutions to overcome them.

Marco Guardi, ARM, CRIS
35 months ago
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An audit is to seek out the true and accurate "picture" of the financial standing of the company. Are we making money or are we losing money. If you answer each of those questions, either or both, you will 1.) find out where you are making the most money by source of revenue or 2.) find out where you are losing money or spending too much of it. Only when you find discrepancies does the word (I use very infrequently) fraud enter into the picture. To review, seek the truth of where the money is going and if you identify problems with money flow, you should have a basis on where your problems are.
Brian A. Cashman

Brian Cashman
35 months ago
I might avoid the use of words like "true" and ":accurate" when referring to the audit process (although our UK colleagues use "true and fair" language). The literature defines the objective of a financial statement audit as decreasing to a tolerable (ie, acceptable) level the risk of material misstatement due to error or fraud. Inherent is the concept of reasonableness, not certainty. - Herb 34 months ago
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On the financial side an audit is a way to assess if the financial report of an organization reflects the real situation. It could be applied to products and services to check if these meet with the requirements or to processes to verify their effectiveness.
You could have an internal audit or external ones performed by a customer or independent organizations.
The goal is to verify performance and compliance.

Paolo Beffagnotti
35 months ago
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Any organization must do their work efficiently to produce a quality output. Each and every employee of that particular organization is responsible for the growth and success of the company. They should work assuming each day as an audit day and maintain the same performance like they do during an audit. New employee should be given proper training after joining and also on job training is important to educate them on regular basis. All the employees should be given regular training related to their job and also related to workplace health and safety, good documentation practices, good manufacturing practices, fire fighting, evacuation drill, mock drill, risk and hazard, etc.

Abhishek Raj
35 months ago
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One thing we have done with the help of the Institute of Internal Auditors is building a brand for our department. During Internal Awareness month, we would have an event that promotes better understanding our our group, what we do and more importantly why we do it. We also have promoted our guest auditor program. That has absolutely help the business understand our perspective.

Cynthia Watson
35 months ago
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I would also add that the Center for Audit Quality has published a number of excellent publications meant for audit committees to assist them in understanding the objectives (and limitations) of an audit and how to assess the quality of the firm (known as "audit quality indicators").

It will be interesting to see if the new public audit report will increase communication and the understanding of the auditor's role.

Herb Chain
34 months ago

Have some input?