Auditing

  Auditing refers to the process of examining and evaluating a business’s financial statements. During this process, an auditor checks if the business’s financial statements are up to date and free from any inaccuracies. A clean record reveals that your business is in good health.

 1). Internal auditors

After bookkeepers complete their and accountants prepare their financial statements, these are checked by internal auditors. An internal audit is an examination of a company’s accounts by its internal auditors or controllers. They evaluate the accuracy or correctness of the accounts, and check for errors. They make sure that the accounts comply with, or follow established policies, procedures and standards, laws and regulations.

The internal auditors also check the company’s system of control, related to recording transactions, valuing assets and so on. They check to see if these are adequate or sufficient and, if necessary, recommend changes to existing policies and procedures. 

 

 2). External auditors

Public companies have to submit their financial statements to external auditors-independent auditors who do not work for the company. The auditors have to give an opinion whether the financial statements represent a true and fair view of the company’s financial situation and results.

During the audit, the external auditors the company’s systems of internal control, to see whether transactions have been recorded correctly. They check whether the assets mentioned on the balance sheet actually exist and whether their valuation is correct. For example, they usually check that some of debtors recorded on the balance sheet are genuine. They also check the annual stock take (UK) (US. Count of the inventory)- the count of all the goods held ready for sale. They always look for any unusual items in the company’s account books or statements.

Until recently, the big auditing firms also offered consulting services to the companies whose accounts they audited, giving them advice about business planning, strategy and restructuring. But after a big number of financial scandals, most accounting firms separated their auditing and consulting divisions, because an auditor who is also getting paid to advise a client is no longer totally independent.

 3). Irregularities

 

 

Exercise 1:

Match the job titles (1-4) with the descriptions (a-d). Look at A and B opposite to help you.

 

1 bookkeepers  2 accountants  3 internal auditors  4 external auditors

a  company employees who check the financial statements b  expert accountants working for independent firms who review companies' financial statements and accounting records e  people who prepare financial statements d  people who prepare a company's day-to-day accounts

 

 

Exercise 2:

Complete the table with words from A, B and C opposite and related forms. Put a stress mark in front of the stressed syllable in each word. The first one has been done for you. Then complete the sentences below with the correct forms of words from the table.

 

Verb	Noun	Adjective
		'accurate
	compliance
recommend
	record
	examination

 

1 I'm an internal auditor. I………………….. the company's accounts, to make sure that they are ………………………, and that they ………………………… with company policies and general accounting principles.

2 If the control systems aren't adequate, I make ……………… concerning changes.

3 The external auditors check to see if transactions are being …………….. correctly.