Basics Of Auditing and Its Importance for Business

Basics Of Auditing

The process by which any business transaction is recorded and reported is called “Auditing”, the results obtained from accounting practices serve as continuous feedback for the management to base their decisions upon. The auditors in UAE are well aware of these systems and perform their duties on the basis of auditing basics. These basic auditing system can be segregated into different classifications;


Any item purchased not to be consumed immediately falls under the category of “assets”. Inventory, furniture and fixtures, and receivables are a few examples. 


Liabilities refer to the obligation of a business to make a payment at a later date, loans and payables are an example.


Equity represents the ownership of the owners in the business, in accounting terms, it is the value of the assets of any business after deducting its liabilities. Common stocks and preferred stock are an example.

Also Read: Top 5 Advantages of Business Agility


Amount received against the supply of the goods or services produced by a business. Revenue can be from the sale of both direct and indirect products of a business.


The amount consumed in a given period of time by the business to procure consumables, salaries paid and assets fall under the category of expenses.

The process of verification by inspection, examination, of a system including process and quality parameters to gauge its compliance and performance, is called an auditing process. The whole auditing process is based on the principles of honesty and secrecy, it involves key processes like;


The auditor plans his work thoroughly ensuring efficiency and accuracy. To plan and execute the audit process smoothly and effectively, the auditor runs thorough scrutiny of the assets, liabilities, equity, revenue, and expenses of the organization under audit. The planning stage is targeted and based on the basics of auditing and its importance for businesses and organizations. In the planning, stage auditors chalk out a plan on how to handle accounting policies and systems, internal control system analysis, and determine audit procedures and coordination of the audit process. 

Must Read: Data Management Best Practices to Avoid Salesforce Data Recovery Cost

Evidence Collection

A set of a predetermined set of procedures is followed in order to collect evidence regarding any abnormalities extracted from both the books and physical operations of any business or organization. This evidence can be related to the accuracy, data validity, compliance, and transparency of a transaction or procedure. 

Internal Systems

A company or business without internal control cannot operate and survive in the competitive market, a comprehensive set of controls and systems are mandatory for any business to perform. The audit process treats the internal systems of any organization/business as an integral part while conducting an audit. The internal systems and procedures are thoroughly scrutinized by the auditors in order to highlight any anomalies and point out lags and faults of the system under consideration. 

Must Read: How Scheduling with Software is an Aid to HR System?

Skill and Competency Levels

An audit is usually performed by highly competent and skilled auditors, they not only judge the effectiveness of the system but also gauge the competency level of the personnel handling that system. This study and scrutiny process carried over the skill and competency levels help a great deal in identifying and suggesting suitable solutions to highlighted issues. 

Paper Work

The auditors tend to preserve any and all paperwork carried out during the course of the audit and include them in the audit report as a part of the record complimenting their assessment regarding the process and the recommendations that they make for improvement.


One of the main objectives of the audit is to make sure that the operations of an organization in all aspects adhere to the laws and regulations laid down by the authorities. It is the primary responsibility of the auditor to highlight and provide solutions to any of the activities that are against the law of the land. 

Audit Report

Once the audit phase is through, the auditors compile a formal final report of the audit exercise, explaining in detail the findings. Any and all issues are highlighted in the final report along with the necessary recommendations that target system optimization and improvements. 

The principles of auditing rely heavily on the accounting principles, an effective audit exercise draws its result and recommendations from the record that is presented to the audit team during the course of the audit. Conducting regular audit not only enables businesses to measure their true performance but also help in introducing the much-needed changes that can prove to be stepping stone towards business growth and profit yielding. 

Also Read: 11 Ways to Improve Your Business’ Worth

Leave a Reply

Back To Top