Audit

Question 1

Define an audit.

Answer 1

Inspection of a company’s financial info/financial accounts.

Question 2

Why do audits need to occur?

Answer 2

Shareholders require accurate information require accurate information regarding the financial state of the business they are investing in.

Question 3

What prompted audits to be introduced.

Answer 3

-Finanical scandals caused pressure for change. Even today scandals occur like Carillion.

Question 4

How do Audits occur? Describe both steps.

Answer 4

1. Gather evidence:
   - Read/review accounts/reports/records.
   - Question people.
   - Re-calculate figures.
   - Check figures to external sources like the bank.
2. Deliver results:
   - Complete audit workpapers.
   - Report results to shareholders and other bodies of interest.

Question 5

What are the aims of financial reporting when it comes to an audit?

Answer 5

• Financial figures are accurate.
• Financial transactional/figures are up to date.
• Assets owned by the company.

Question 6

What are 5 reasons to hold an audit?

Answer 6

• Provides an external unbiased, accurate viewpoint on the current situation of the business.
• To assure the business is in compliance with a multitude of administrative regulations.
• To instil confidence that the company is in a stable position and is prepared to deal with any rough patches ahead.
• It can can assist the business in obtaining a loan from the bank as the financial records will be up to date and accurate.
• Counts as a legal document which can be used in a court of law as evidence in support of the company.

Question 7

What are three reasons not to hold an audit.

Answer 7

• Too costly.
• Audits can cause disruption in the workplace which can lower productivity.
• Requires money and time when in reality there is no guarantee the business will learn anything from the audit, this is because audits only provide persuasive evidence, rather than conclusive.