What is an audit?

Elena Melnichenko
Elena Melnichenko
March 18, 2015
What is an audit?

The term "audit" is well known to accountants and economists. Like many other terms, the word came to us from the Latin language, which translates as "listening."

In a broad sense, an audit means any check that is performed by an independent expert. There are several types of audit: operational, technical, environmental, etc.

Audit in the economic sphere

An audit is an independent examination (verification) of the financial activities of an organization, which is carried out by specially trained people - auditors. They check whether all financial transactions do not contradict the law, whether the established rules are followed when maintaining accounting records, whether the activity report, etc., is carried out reliably and completely.

Audit arose with the birth of monetary relations. Ancient auditors checked merchant books for the accuracy of the data. Later, the audit developed on the basis of the division of interests between the management companies and those who invest in the performance of their activities (investors, shareholders and owners).

Due to the fact that the risk of financial investments increased, investors could not believe the financial information provided by the management. They wanted to be completely sure that they were not being cheated. Therefore, the shareholders found a way out of this situation by inviting people who could carry out the inspection and evaluation of the activity. Such auditors must be honest in order for investors to trust them.

This small historical information helps to understand what an audit is. At the moment there are several types of audits. For example:

  • Initiative audit is conducted on the initiative of the company’s management to identify shortcomings in the work of the accounting department.
  • Internal audit - is performed by the organization’s own forces in order to carry out operational control.
  • External audit - this audit involves the specialists of certain audit firms in order to get an assessment of the activities of the company from the outside.
  • Mandatory audit - verification of the activities of accounting and financial reporting, which is held every year.

Without this independent assessment, no organization can function.

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