What is auditing? More specifically, what is financial auditing?
In big corporate entities ( Multinational- Companies, listed companies), small-to-meidum businesses, sole proprietor,etc, the entities are, required by law, to keep accounting records of the business on a timely basis. Hence, the entities hire accountants to keep the accounting records, that reflect the day-to-day business acitivities of the Company, as well as financial position of the Company.
The financial results are summarized and presented in what we called: Statutory Account ( Financial Statements/ Annual report for listed Company). How do we ensure that the financial results presented are accurate?
The auditors, independent party, are engaged to audit the financial results prepared by the entities. The auditors provide an independent check on the accounting policies, method of estimation, mathematical accuracy on the financial results presented.
The tasks are not as easy as other people would thought, as auditing involve a lot of professional judgement to ensure that the accounting policies adopted are not materially deviated from the local financial reporting standard.
In short, auditing provide and independent check on the financial results, and publish an opinion on the financial results of the entity: to give opinion on if the financial results are fairly stated.