What is Audit Oversight
An audit is an independent examination of the books and other documents of an organization to determine if their financial statements present a true and fair view.
Audit Oversight Defined
Audit oversight refers to the verification and checking of the reported financial results of an organization by external and internal review. Financial audits verify the integrity and reliability of an organization's financial reporting process and that these reports repent a fair and accurate assessment of its current financial health.
Regular audits promote confidence in a company's management and financial results.
Public companies are required to place their audited financial statements, on public record. This enables outsiders such as investors or bankers access to verified results.
What are the Audit Assertions
Properly conducted audits ensure the following assertions are followed:
- Accuracy of amounts and information presented
- Integrity of information disclosed, no information is missing or falsely presented
- Occurrence of reported transactions is factual
- Validity, where reported transactions properly relate to the organization
- Understandability, where reported information is clear and not obfuscated making it difficult to understand
Auditors also have to ensure that there are no material weakness exist in the organization's internal control mechanisms. They also ensure financial rules and processes are followed within the company.
Types of Financial Audit
There are various types of audit, depending of the outcome required. These include:
- Financial statement audit
- Internal controls audit
- Compliance audit
Financial statements are drawn up according to certain agreements relating to accounting practices and are stipulated in a ‘framework’. A number of these types of frameworks exists and often contain of requirements that are country specific.
The main Frameworks are GAAP (USA) and IFRS.
There are also circumstances where specific rules are set down, these are refereed to as OCBOA (other comprehensive basis of accounting) instances.
Multi Location Audits
Some organizations are made up of groups of companies or other business constructs that add significant complexity to the audit process. Group companies can be geographically dispersed, which adds regional regulations and currencies to the equation.
Finally, when an audit is complete, the auditors are expected to provide a professional opinion of the state of the financials that have been audited.
The audit opinion needs to provide reasonable assurance that the financial statements they have audited have no material errors however these errors may have arisen. Also, that the financial state of the organization is properly reflected as per the requirements of the accounting standard that has been applied.
Understanding a financial statement audit by PricewaterhouseCoopers