Audit deals with checking, verification and examination of accounts. Audit begins once accounting is complete and hence there is an interrelationship between auditing principles and accounting. Proper development of accounting principles is important for an adequate auditing procedure and principles. The major purpose of auditing is to provide financial statement users with an opinion on the authenticity of the financial statements in accordance with the financial reporting framework. These frameworks are designed to meet the requirements of a wide range of users.
There are different auditing standards established that can be followed. They include the Generally Accepted Auditing Standards (GAAS) issued by AICPA’s Auditing Standards Board (ASB) in the form of Statements on Auditing Standards (SAS), Generally Accepted Government Auditing Standards (GAGAS), Public Company Accounting Oversight Board (PCAOB), and International Standards on Auditing.
Auditing adds credibility to accounting because the auditors group is independent of management. They take an objective view and hence activities of the company are reported without a bias or a conflict of interest. Auditing helps in increasing the faith that the public have on financial statements of the company.
There are many benefits for audit including the satisfaction of the owner, detection and prevention of errors and frauds, verification of books, independent opinion about the auditor, moral check, protection of the rights and interests of shareholders, additional reliance by outsiders, ensuring compliance to the legal requirements, reinforcing and strengthening of the internal control, and lending funds on the basis of audited balance sheet.
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