Question

Respond to the following in a minimum of 175 words:

What are the goals of conducting an audit of financial statements and internal controls? Who typically conducts such audits, how often, and for whom?

Answer 1

Financial Statements are the reflecting images of how an organisation has operated over a period of times and it's results based on that. As a lot depends on those financial statements their audit becomes a necessary requirement.

The goal of conducting an audit of financial statements is to make sure and draw reasonable assurance that the Financial statements represents a true and fair view of organisation's financial performance and they are free from any material misstatements. An audit is being done on test check basis being supported by the necessary documents , evidences and collections to ensure that the information included in finanicial statement is reasonable.

Along with financial statements there is a need of audit of internal controls too. For that let us understand what are internal controls? Internal Controls are the policies, procedures and methods that are being by the personnel staff of an organisation to ensure that the work is performed in a designated manner, there is a proper safeguarding of the assets and the accounting data being used to prepare financial statements is true, reliable and prepared giving proper adherence to the prescribed management policies.

Therefore the audit of internal controls is of significance also. The goal of conducting audit of Internal controls is to make sure that there are proper internal controls like proper planning, trustworthy personnel, segregation of duties, proper supervision of the work performed, proper accounting tools ets to make sure that the organization is having a strong internal control system. The effectiveness of internal controls plays a major role in deciding the scope of audit, if the internal controls are weak there is more requirement of extensive and substantive audit procedure whereas strong internal controls require less extensive audit procedures.

The audit is being usually conducted by a the auditors, typically saying auditors are the persons who are being defined as the persons who are legally entitled to carry the audit as per the laws of that particular country as per their laws.

Normally the audit is being done for a single financial​ year at once, financial year can be different​ from country to country. Moreover the period of audit depends on the volume of the business for ex audit of a big organisation would require the audit to be done in half yearly basis for proper accountability whereas the audit of a small business can de done on yearly basis.

For whom audit is to be conducted is a tricky one. Audit can be done either on voluntary basis or on compulsory basis as well. Government of every country set some minimum guidelines to perform audit. Organization falling within those guidelines are required to get their accounts audited necessarily whereas there is no restriction if some organization want to get its accounts audited on voluntarily.