As a result, the word “audit” comes from the Latin word “audire,” which means “to hear.” When company owners claimed theft in the past, they named those people to investigate the accounts. Those individuals summoned the accountants and “heard” whatever they wanted to say about the accounts. Luca Paciaio, an Italian, was the first to publish his treatise on the double-entry method of bookkeeping in 1494. He defined and explained the duties and responsibilities of an auditor; however, the complexity and meaning of audit, as well as the duties and responsibilities of an auditor, have changed significantly since then.  An audit is where an inspector examines or inspects different records of records, supplemented by a physical inventory search, to ensure that all agencies are implementing a documented method of tracking transactions. It is done to ensure that the financial statements issued by the organization are accurate.

External auditing can be performed by staff or department managers, and external auditing can be done by a company or an impartial auditor. The aim is for an impartial body to audit and validate the records and ensure that all books of accounts are completed fairly and that no misrepresentation or theft is taking place.

Auditing Types-

There are three categories of audits, as per the book “Auditing & Assurance Services: An Integrated Approach (15th edition)”

  1. Operational Audit: Operational auditing is concerned with assessing the performance and reliability of every aspect of a company’s operational processes and practices. Following the conclusion of the operating evaluation, management normally expects recommendations for strengthening the organizational processes. The audit’s scope extends beyond accounting to include evaluations of corporate structure, computer processes, marketing, and so on.
  2. Compliance Audit: Compliance audits are conducted to decide if a customer has adhered to specific laws and regulations established by a higher authority, such as the judiciary, the BRTA, or the BSEC.
  3. Financial Statement  Audit: The aim of a financial statement audit is to ensure that the financial statements are compiled and reported in accordance with the prescribed requirements (GAAP).

Procedure for Auditing-

  1. Audit Planning: The audit procedures must be carefully organized and managed in order to carry out the audit accurately and efficiently. This encourages auditors to save money, prevent misunderstandings, and collect enough and appropriate data.
  2. Knowledge of the Client’s Business: This enables the auditor to recognize key areas of possible misstatement, identify complicated transactions with a greater risk of error, and assess the client’s ability to proceed as a going concern.
  3. Creating the Audit Program: The audit program lays out the processes that must be observed during the audit.
  4. Audit Data Collection and Analysis: All accounting documents found in financial accounts, as well as other material such as confirmation by third parties, are called audit-proof.
  5. Assessing Inherent Risk: The auditor’s ability to assess fraud, as well as the particular features of the company and its market, will raise or minimize the risk.
  6. Assessing Control Risk: Knowing the client’s internal controls helps the inspector to spot possible areas of a misstatement as well as the factors that could influence the risk of content misstatement.
  7. Execute the Audit: The audit is carried out in accordance with the program, and the two tests mentioned below are carried out: I ) Control Test ii) Substantive Test
  8. Monitoring Evaluation: The auditor uses this test to assess whether the monitoring procedures are successful in reducing the likelihood of information misstatement.
  9. Substantive Evaluation: This test determines the completeness, precision, and quality of the data provided by the accounting system.