An audit when a company or an individual’s financial records are thoroughly looked over to assure that they are accurate and truthful. When a company or a person has is faced with auditing, illegal acts such as embezzlement, fraud, or misuse of funds can be discovered.
Audits are done without any judgment. Normally a company or person will hire an outside company to complete the audit therefore now bias can occur. In some large companies, with a thorough and well-staffed accounting department, the audit may be completed without outsourcing to a different company.
Whether an audit is completed by the company or by an outsourced company, it is common for a neutral party to be used to approve the records that where discovered. During any type of audits, all finical records must be pulled including: bank statements, payroll documents, and tax information. These documents will be thoroughly reviewed.
Often audits will uncover a mistake done by an accounting department; however, in other audits harmful and highly illegal records and acts may be discovered. Audits can also determine whether a company is facing bankruptcy.
Any issues uncovered by the audit must be resolved by the company or the individual. If errors cannot be fixed due to a lack of money, then the company or the individual may face bankruptcy proceedings so that major creditors can be reimbursed the money they are owed. All auditing results are documented and turned into different government offices. Often any lending companies that the company or person have been using may also receive records of the audit as well as its results.