Definition of Auditing

Topics: Auditing, Financial audit, Audit Pages: 8 (1953 words) Published: April 22, 2013
I. Definitions
* Auditing, in a general sense, is a systematic and critical evaluation of the financial position, operating systems, and results of operation of an audited entity. * A systematic process of obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain degree of correspondence between those assertions and established criteria and communicating the results to interested user. * The analytical and systematic examination and verification of financial transactions, operation, accounts, and reports of any government agency for the purpose of determining the accuracy, integrity, and authenticity, and satisfying the requirements of law, rules, and regulations.

State audit relies on the provisions of law; its authority and limitations are prescribed by law and it is conducted in accordance with law. The 1987 Constitution and related laws set the scope, powers, functions, and jurisdiction of government auditing.

Auditing in Public Administration
State auditing (along with accounting) may be considered as the control and accountability component of fiscal administration cycle. * As a control mechanism, auditing ensures the proper and legal utilization and management of fiscal resources in accordance with sound financial management principles, accounting and auditing standards, and applicable laws and regulations. * As an accountability component, it seeks to ensure that public officials entrusted with functions and resources are made responsible for the performance and results of operation of their office. * In the Fiscal administration cycle, auditing also provides inputs to the next phase which is planning. Audit reports contain vital information on the results of operation of agencies and recommendations to improve their performance.

Auditing and Accounting
* Accounting is a discipline which provides financial and other information essential to the efficient conduct and evaluation of the activities of an organization. * Is concerned with constructing from a mass of transactions entered into by a firm or agency during a certain period, financial statements, results of transactions (in terms of profit and loss), and current financial position, through the interpretation, summarization, and compilation of information. Auditing

* Is primarily concerned with analyzing whether or not the financial statements reasonably represent the result of the firm’s operations.

A. Timing
* Pre-audit - The auditor reviews a transaction (a contract for janitorial services, for example) even before such services are rendered. The auditor also gives his tentative approval for payment of the services by the agency. * Post-audit – The auditor reviews and approves the transaction after the services have been rendered and payment has been made In both cases, the review may consist of the following:

* Determining whether all relevant laws, rules and regulations have been observed in the transaction. * Physical inspection of supplies or equipment.
* Checking whether all necessary documents are submitted and properly accomplished. * Determining whether the required authority or approval has been secured. * Checking mathematical accuracy.

B. Organizational Status of Auditor
* Internal Audit
* The internal auditor undertakes an analytical view of balances disclosed in the financial statements to determine that the information contained in the statements is consistent internally, with budget accounts, and with those of prior years. He may also insist, in an advisory capacity, in adopting basic organizational regulations, preparing rationalization proposals, and recommending measures to improve the structural and procedural systems of the agency. * In small agencies, the internal audit is usually conducted by accounting or controller units * In large organization, it is done...
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