The Importance Of Auditing For Preventing Fraudulent Activities

Decent Essays

The Importance of Auditing For Preventing Fraudulent Activities


Accounting 302
Dr. Ohene
Spring 2015

In the accounting profession, whether its managerial or financial accounting, the systematic examination of the accounting records (books, documents, vouchers, etc) is defined as auditing. The Federal Securities and Exchange Commission, or the SEC, requires companies that are publicly held to have their financial statements examined by an auditor(s). In auditing, the primary purpose is to ascertain how “fair and true” the financial statements represent the issue under concern. Auditing acts in the purpose to add assurance; Assurance is the guarantee that the records and statements have been fairly …show more content…

II. Purpose of Audits ( First, Second, and Third Party Audits)
The generalized purpose of audits regardless of internal or external classification, is to provide impartial opinions about the quality of services and/ or products provided by the company as well as assess the various elements that assist in the creation of company produces, development of financial statements, and how (and with what accuracy) the statements are reported. Through first, second, and third party auditing information is evaluated for uses both internal and external by departmental segments of the company (first party) , consumers of the company being audited (second party), and independent auditors that work for neither the supplier nor the consumer (third party). All three forms of audits provide key information that investors, shareholder, possible businesses partners, and consumers would rely on to make decisions. Ultimately, the product of these audits helps minimize the risk associated with those various decisions and illustrate how the entity being audited conducts business.
Internal audits, sometimes referred to as a “first party audit,” are generally performed for the use of the company by a departmental unit from within. The general purpose of such self assessment is to observe procedures and policies within the company to be analyzed and possibly modified accordingly. Company procedures are under

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