The accounting profession is not restricted to those at various levels of management. It is open to everyone who has the right training and qualifications. As such, there are numerous ways of auditing the financial statement. The three main types of auditing are internal audit, external audit and public audit.
Internal audit generally occurs when a company’s books and records are examined by an external auditor who is independent of the company. It is undertaken on the basis of an agreement that outlines the nature of the work to be done. This type of audit is usually carried out after the completion of the company’s financial statements.
External audit is carried out by an outside auditing company. It usually occurs after the completion of a financial statement review. It involves the examination and interpretation of the statements being examined for the purpose of establishing their accuracy and completeness. The work is normally carried out by a group of independent individuals or firms. It is most commonly conducted by the GAO or the Financial Accounting Standards Board (FASB).
Public audit is an internal audit conducted by an accountant outside of the company. It is designed to obtain additional information regarding the accuracy and completeness of the financial statements. The examination and analysis of the financial statements, in conjunction with the financial statement review, is designed to determine whether the financial statements are consistent with generally accepted accounting principles. An auditor can be appointed by the company’s shareholders or a regulatory authority.
Some companies hire the services of professional auditors who are hired through third-party organizations such as Professional Accountants International, known as PIA, or by the firms themselves. PIA certifications are issued to professionals, so that they will be able to perform their job to the highest standards.
There are many different methods of auditing the financial statements. In some cases, it may include performing an examination of a company’s financial records, gathering internal data and making use of computerization methods to conduct the study.
In some countries, there are also third-party auditing service providers, which allow the companies to perform the audit themselves. This is a very expensive option for small businesses as a full-time accountant may not be available for long periods, especially during the summer months.
If a company decides to use the services of a third-party auditor, they should be able to provide a complete record of the audit. They should also have adequate experience in financial matters and be skilled in analyzing the financial statements.
An important point to consider is that the auditor’s report should not be overly optimistic or pessimistic. This should reflect what is observed through the audit and what should happen next. There may be cases in which it is difficult to predict the financial future and therefore the results of the audits should be considered as forecasts rather than guarantees. and not guarantees of an audit’s accuracy. The auditors should also provide any supporting documentation if requested.
Some people prefer not to carry out the auditing themselves. The auditor should also provide feedback to the company. It is recommended that the auditor should keep a copy of the reports and leave no stone unturned in his/her reports.
Companies can choose to hire an auditor who will carry out the audit for them as well. This is an alternative to hiring a third-party auditor. The company can rely on the services of an external auditor to carry out the audit and will get unbiased reports.