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'''The most general definition of an '''audit''' is an evaluation of a person, organization, system, process, project or product. Audits are performed to ascertain the '''[[validity]]''' and '''[[reliability]]''' of information, and also provide an assessment of a system's [[internal control]]. The goal of an audit is to express an opinion on the person/organization/system etc. under evaluation based on work done on a test basis. Due to practical constraints, an audit seeks to provide only ''reasonable assurance'' that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of [[Financial audit|financial audits]], a set of financial statements are said to be true and fair when they are free of material misstatements - a concept influenced by both quantitative and qualitative factors. |
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Traditionally audits were mainly associated with gaining information about financial systems and the financial records of a company or a business (see [[financial audit]]). However recently auditing has begun to include other information about the system, such as information about environmental performance. As a result there are now professions that conduct [[environmental audits]]. |
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In [[financial accounting]], an audit is an independent assessment of the fairness by which a company's financial statements are presented by its management. It is performed by competent, independent and objective person or persons, known as '''auditors''' or '''[[accountant]]s''', who then issue an [http://www.small-business-accounting-guide.com/audit-reports.html Auditor's report] on the results of the audit. |
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Such systems must adhere to generally accepted standards set by governing bodies that regulate businesses. It simply provides assurance for third parties or external users that such statements present 'fairly' a company's financial condition and results of operations. |
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==Financial audit== |
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{{main|Financial audit}} |
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==Quality audits== |
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{{Main|Quality audit}} |
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Quality audits are performed to verify the effectiveness of a [[quality management system]]. This is part of a certification such as [[ISO 9001]]. |
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==Integrated audits== |
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In the US, audits of publicly-listed companies are governed by rules laid down by the Public Company Accounting Oversight Board (PCAOB). Such an audit is called an Integrated Audit, and auditors have the additional responsibilities of expressing opinions on management's assessment of the firm's internal control, and on the effectiveness of internal control over financial reporting based on their (the auditors') own assessment. These requirements are consistent with Section 404 of the 2002 Sarbanes-Oxley Act. |
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==Types of auditors== |
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There are two types of auditors: |
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'' |
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*''' [[Internal auditor]]-''''' are '''employees''' of a company hired to assess and evaluate its system of internal control. To maintain independence, they present their reports directly to the Board of Directors or to Top Management. They provide functional operation to the concern. Internal Auditors are employees of the company so that they can easily find out the frauds and any mishappening. |
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*'''[[External auditor]]''' are '''independent staff''' assigned by an auditing firm to assess and evaluate financial statements of their clients or to perform other agreed upon evaluations. Most external auditors are employed by accounting firms for annual engagements. They are called upon from the out side of the company. |
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==Major auditing firms== |
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The four largest accounting firms in the world are collectively referred to as the [[Big Four auditors|Big Four]]. They are as follows: |
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#[[PricewaterhouseCoopers]], also known as PwC |
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#[[Ernst & Young]], also known as E&Y |
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#[[KPMG]], formerly known as Klynveld Peat Marwick Goerdeler |
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#[[Deloitte Touche Tohmatsu]], also known as [[Deloitte]] |
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There are many other audit firms competing with the big four for major audit engagements. Competition has intensified in response to independence issues and other legislative requirements introduced as a consequence of the [[Arthur Andersen]] Scandal. In the US and Australia, these firms are referred to as "mid-tier". Some of these include: |
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McGladrey & Pullen, [[PKF]], [[Pitcher Partners]], Johnson Lambert & Co. LLP, Beard Miller Company LLP (bmc), [[BDO Seidman]], and [[UHY firm]]. |
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In the UK the medium sized firms are also referred to as mid-tier. Many of these firms are international and increasingly are competing for work against the Big Four, especially following the recent large auditing [[Enron scandal|scandals]]. |
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==Auditing firms around the world== |
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While the four major audit firms listed above provide audit services to the largest corporations in America, audit firms around the world are also in partnership with the Big Four. Since corporations held offices in other parts of the world, they tend to be audited by affiliates of the Big Four to maintain consistency and uniformity in their application of auditing standards. |
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==See also== |
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* [[Academic audit]] |
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* [[Auditor's report]] |
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* [[Single Audit]] |
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* [[Audit risk]] |
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* [[Clinical audit]] |
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* [[Computer security audit]] |
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* [[Conformity assessment]] audit (ISO, HACCP, JCAHCO) |
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* [[Environmental audits| Environmental audit]] |
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* [[Financial audit]] (the oldest) |
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* [[Information technology audit]] |
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* [[Internal audit]] |
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* [[Performance audit]] |
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* [[Auditing (Scientology)|Scientology auditing]] |
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* [[Software audit]] |
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* [[Audit (telecommunication)|Telecommunication audit]] |
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* [[Audit Planning and Controls]] |
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* [[Benford's Law]] |
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==External links== |
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* [http://www.attuariale.com Studio di Consulenza Attuariale IFRS/IAS] |
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* [http://www.cnss.gov/Assets/pdf/cnssi_4009.pdf National Information Assurance (IA) glossary] |
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* [http://www.aabaig.com/resource/index.php?c=2 Auditing Resources at AAB Resource Center] |
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* [http://www.audithink.com/ Internal Audit Knowledge Center & Free Source for Audit] |
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* [http://www.abrema.net/abrema/in_dex.html Glossary of auditing terms] |
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* [http://www.cnss.gov/Assets/pdf/cnssi_4009.pdf National Information Assurance (IA) glossary] |
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* [http://www.ifrslist.com/ IFRS List - The online community about IFRS/IAS and Auditing] |
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* [http://www.sequence-inc.com/index.php?option=com_content&view=article&id=119:Why%20Didn't%20Our%20Auditors%20Find%20the%20Fraud?&catid=9:Press%20Archive%202006&Itemid=41/ Article - Why Didn't Our Auditors Find the Fraud?] |
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* [http://www.farahatco.com/ Farahat & Co. - Accounting and auditing company in UAE] |
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* [http://www.cbandco.com/ Curtis Blakely & Co., P.C. - Accounting Firm in Longview, Texas] |
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[[Category:Auditing|*]] |
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