Auditing is done to understand a company or an individual’s tax return. Auditing can provide information of a company’s internal management as well as the truthfulness of the company. Auditing allows for a company or an individual to clearly justify their tax returns and state their opinion about the situation.
Often, auditing is done to help determine where money has been spent, if it has been spent, or if it is being hidden. Since a large part of auditing has to deal with money, accounting plays a large role in the auditing process. Financial audits look at financial statements to determine if they are both fair and true.
Originally, most audits were financial based and were always looking towards the accounting department to determine if in fact all monies could be accounted for. Financial audits require a person to complete the audit who will remain fair to the company’s financial statements. Often accountants will conduct the audit and create the audit report.
When a company is undergoing in an cost audit a verification of the costs of the company is taking place. Cost accounting will thoroughly look at the cost of manufacturing, materials, labor, offices supplies, and so on, to determine if the company is using the money that was claimed in the correct areas.
Although there are many different type of auditing, and some focus more on facts and documentation as opposed to money and accounting, auditing can be especially detailed and stressful. Regardless of the reasons a company or an individual is being audited, it may be beneficial to seek help and advice from an individual familiar with the auditing process or has a background in accounting.