AccountingBusiness

The Audit Importance of Accounting

The audit is a concept that is becoming more known to the public. Indeed, following the increase in the number of fraud made by business leaders and media coverage assigned to them, the media often discuss the audit, its usefulness and its importance in business. First of all we must understand that a significant number of financial structures, such as financial markets, for example, can not properly exist without the presence of the audit.

Essentially, the audit is the verification of information (eg financial statements) of a company. This audit is carried out by auditors working for an accounting firm or the company itself in the internal audit department. The presence of the audit did however not limited to private companies. Public body (such as municipalities for example) and the government itself must be audited frequently to ensure that the figures presented are accurate.

The importance of the audit accounting is often clearly illustrates through examples from everyday life. Take for example a manufacturing company that wants to get a mortgage loan from a bank. How can the bank to ensure that the figures presented in the financial statements by the leader are actually real. This is where listeners come in. The bank will often require an audit or review engagement accompanied by an unqualified report signed by auditors and claiming that the figures presented in the financial statements are free from errors important. Thus, the bank will know that his client meets the required ratios and the company is not insolvent.

This process can also be repeated in many other financial transactions, from buying a company from another in an initial public offering (IPO). Listeners are essential for the stability and continuity of financial markets and capitalist society.

In fact, the auditor work comes from a request of the company itself and therefore users of financial information. Users, as these is an individual investor, a bank or another company, want to have an assurance of the figures presented in the financial statements. The number of transactions in some companies is huge and growing complexity, an individual without training and access to the financial statements may not actually be sure of the figures without external intervention, that of the external auditor who adhere to a code ethics of the Association of Chartered Professional Accountants (CPA) of his region.

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