Importance of Audit Service in Business Security
“Audit service is important and cannot be exaggerate and a good audit service is not only able to clear company issues quickly, but also helps to enhance company system”
The word Audit is defined as the on-site verification activity such as examination or inspection of the internal work process as well as the quality system of an organization. It is derive from the Latin word “audire” which depicts “to hear”. At primitive times when manual book-keeping was common, auditors in Britain use to hear the accounts systems in order to check that the companies’ staff were not negligent or fraudulent. Audit service facilitate in evaluating the effectiveness of a business internally and maintaining an effective Business security by facilitating internal controls.
It is vital for achieving organizational long-term goals by obtaining reliable financial reporting on its operations, preventing fraud and misappropriation of assets, and minimizing the unnecessary cost. An Audit service for Business Security can be applied to either an entire organization or to a specific function, process or production step. It also has special administrative purposes, such as auditing organization documents, minimizing risk followed by the organization, or following-up on completed corrective actions.
Besides the financial audit system, the auditor for every subject matter provides third party quality assurance. There are many other areas, which are commonly audited such as Secretarial & Compliance Audit, Internal Controls, Quality Management, Project Management, Water Management & Energy Conservation etc. In the world, International Standard for Organization, ISO 19011:2018 is mainly focus on qualitative audit system. It defines an audit as a “Systematic, independent and documented process for obtaining audit evidence which involve records, statements of fact or other information which are relevant and verifiable.
Why audit service is important for Business security ?
Many organizations do not know about the effectiveness of audit process due to the lack of independent auditors and as a result, the business suffer during their operation process. Audit, being a systematic and independent examination of books, accounts, statutory records, documents and vouchers, always presents a true and fair view of concern for the organization. Thus, having an effective audit system is important for the organization because it enables them to follow and attain its various corporate objectives.
Further, any business processes need various forms of internal control to facilitate good services, supervision, and monitoring actions, which prevent and detect fraud transactions, measure current activities and maintain adequate business records to promote the operational productivity of the organization. Besides, internal auditors review the design of the internal controls and minimize risk from any circumstances which may occur within the organization.
Audit verifications process
As verification is essential in the audit process, it is mandatory for all organizations. Every organization needs to be involve in audit verification process by taking the service from external auditors.
Therefore, conducting/delivering timely audit service through consultant auditor/independent auditors, for the organization will certainly help to prevent stealing the money or any other fraudulent work within the organization. In order to minimize the fraud dictation of money or other fraud-related activities of the organization at an early period, it would be helpful to start with internal audits of each department with an external auditing source.
Why audit assessment is important for Business Security?
The purpose of such assessment is to calculate a value for audits. An independent professional can have an assessment that may involve an audit and its main purpose is to provide a measurement rather than to express an opinion about the fairness of quality system/financial performance of the organization.
Types of Audit Service
1. Information Technology Audit
An information technology audit is also popularly known as an information system audit. It is the process of examining the management controls through an information technology (IT) infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity and operating effectively to achieve the organizational long-term goals.
2. Financial Audit
Financial audits including taxation, misspelling and other forms of fraud related to money are the misstate financial information. Therefore, any type of audits has become a legal requirement for entities. Who have the power to exploit financial information for personal gain. Traditionally, financial audit was conducted for gaining information about the financial system and the financial records of the organization.
However, now financial audits are performed to ascertain the validity and reliability of information as well as to provide a system for internal control scrutiny. As a result of this, a third person can express an opinion related to the organization system. The opinion given on financial statements will depend on the audit evidence obtained. Hence, financial audit can be important for any organization in order to gain effective and efficient financial results.
Benefits of financial audit
- Better rate of securing financing
- Preparation for business growth
- Lower interest rates on business loans
- Identify business weaknesses to avoid future tax penalties
Therefore, financial review leads greater familiarity to business owners on how the business operates, uses cash and assumes risk.
3. Performance Audit
It refers to an independent examination of a program, function, operation or the management systems & procedures of the organization. Performance audit conduct in order to supervise the quality system of an organization. Performance Audit also facilitates in achieving economic efficiency and effectiveness in the employment of available resources, safety, security, information system performance and environmental concerns. Hence, one can find many audit professionals specialize in information system audits and in security audits.
4. Quality Audit
Quality audit is perform to verify conformity or non-conformity to standards through a review of objective evidence. A quality system is a part of the certification bodies such as ISO 9001 and a system of quality audits may verify the effectiveness of a quality management system.
Importance of quality service for the organization
a) Quality audits are essential to verify the existing system of an organization’s objective through evidence by showing conformity to required processes.
b) It examines how successfully processes have been implemented.
c) Quality audits facilitate to judge the effectiveness of achieving any defined target levels.
d) Quality audits are also necessary to provide evidence concerning the reduction and elimination of problem areas. Hence, they are a hands-on management tool for achieving continual improvement in the organization.
Types of Auditors
Auditors of financial statements & non-financial information (including compliance audit) can be classified into three categories.
External Auditor/Statutory Auditor
It is an independent entity engage by the client subject to the audit. To express an opinion on whether the organization’s financial statement is free of material misstatements; whether due to fraud or in some other errors.
For publicly traded organizations, external auditors may also be required to express an opinion on the effectiveness of internal controls over financial reporting. Where, external auditors may engage to perform other agreed-upon procedures, related or unrelated to financial statements.
Statutory cost auditor is an independent firm engage by the client subject matters. The cost audit is conducting in order to express an opinion on whether the company’s cost statements. And cost sheet are free of material/goods/product misstatements due to fraud or error. In the case of public trade companies, external auditors may also require to express an opinion on the effectiveness of internal controls over cost reporting.
The main job of government auditor is to review the finances system and practices of federal agencies. Those auditors report their findings to a concern party of the government. Which uses them to create and manage policies and budgets in every fiscal year.
It is an independent entity engage by the client subject matter to the audit of secretarial and applicable laws/compliances of other applicable laws to express an opinion on whether the company’s secretarial records and compliance of applicable laws are free of material misstatements due to fraud or error and inviting heavy fines or penalties. For public entities, external secretarial auditors may also express an opinion on the effectiveness of internal control over the compliance system management of the organization. This secretarial auditors persons are known as company secretaries in a particular country. Who are the members of the institute of company secretaries of country and holding certificate of practice.
The most commonly used external audit standards is the International Standards on Audition (ISA). Which is develop by the International Auditing and Assurance Standard. Any companies or business firm has to be conducted internal as well as external audits.
The difference between Internal and External Auditors are as follows.
Internal Audit Service
Internal auditors are employed by the organization on the audit process. They work for government agencies (federal state and local), for publicly traded companies and for non-profit companies.
- The internationally recognized standard setting body for the profession is the Institute of Internal Auditors- IIA.
- Internal audit professionals are certified Internal Auditors. CIAs are govern by the international professional standards and code of conduct of the institute of internal Auditors.
- Internal audit is an independent audit body which main objective is to add value and improve organizations operation level.
External Audit Sevice
- Consultant auditors are external personal contract the firm to perform audit as per the firm’s auditing processes and standard.
- External auditors follow their own auditing standards.
- External Auditors is use when the firm lacks sufficient expertise to audit certain areas.
- The external auditor may work independently, or as part of the audit team, that includes internal auditors as well.
To conclude, an audit is a useful tool to keep track of financial and non-financial status of any organization. If an organization has a practice of auditing its functional processes at a regular interval of time. Then, that organization will certainly be able to attain its various objectives.