Audit is an independent examination of financial statement of any entity, whether profitable or not, irrespective of sizes of the firm with a view to express an opinion on the ongoing business of an entity.

Purpose of an Audit

• An Audit is important as it provides credibility to the financial statements and gives the shareholder the confidence that the accounts are true and fair
• Further, it also helps to improve the internal control system

Types of Audit:

1.Internal Audit:

• Internal Audit which itself implies internal evaluation of controls which includes risk management, controls, corporate governance and accounting process conducted by in-house team of experts like CIA, CA.

Purpose : Internal Audit offers management and Board of directors with a value added service by identifying the flaw in a process which can be corrected prior to external audit.

2. External Audit:

• External audit is performed by external auditor who is an independent third party professional who performs an impartial review of financial records of the organization. Moreover they are responsible to client’s accounts and financial statements by preparing impartial reports of funding including any irregularities if any.

Purpose:

• The primary purpose is to enable auditors to perform audits on financial statement using financial accounting so as to form a opinion that financial statements are true and fair
• To ensure that the management has prepared the financial statements in all material aspects in a way that comply with a financial reporting framework as applicable

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