Auditing refers to the practice of assessing the financial statement of an organization to ascertain its truthfulness and validity. The procedure of executing this exercise depends on the policies set by the auditors in relation to the General Accounting and Accounting Policies (GAAP). Due to the rampant dynamics, in some scenarios, auditors adopt the policy of evaluating and establishing the evidence of some segment or the whole of financial statement. Based on the auditors’ opinions concerning an organisation’s financial statement, the organization’s stakeholders become enlightened on the appropriation of funds. In case of fraud, errors, or misappropriation of finances, auditing reveals the hidden secrets or manipulation of data in the financial statements.
The practice of conducting auditing on some selected transactions is considered to have both beneficial and detrimental effects on the opinions concerning financial statements. In the event that auditors test the validity and truthfulness of only some transactions, a realistic judgement that shows the status of the few departments would be obtained. This allows the auditors to analytically and critically scrutinise financial statements and obtain the true reflection of organisations’ use of funds. Additionally, auditors can draw the appropriate opinion on the manner in which financial statements are prepared, and establish their soundness. In the case whereby different auditing exercises are executed by multiple auditors on different transactions in the same organization, an appropriate opinion that is valid for the whole organization can be obtained. This is in contrast to the exercise when executed once on the whole organisation. It portrays the opinion in a precise and concise manner, which puts into consideration some of the minor elements considered valuable. The practice of auditing only the selected transactions may be unrealistic in evaluating and obtaining the evidence of the financial statements since some of the important elements may be omitted. Moreover, the management and employees could use this fact to keep the embezzlement and misappropriation of funds away from auditors.
An audit by a Certified Public Accountant (CPA) is considered by the general society to be negative and non-significant. However, in reality, it has its own core importance. Auditing plays a crucial role in assessing the effectiveness and truthfulness in presenting financial transactions of an organization. Despite the fact that the society claims auditors are non-contributory to the gross national product through their task of evaluating other peoples’ financial work, the auditing exercise is very critical in preventing the embezzlement and misappropriation of funds. Additionally, auditors contribute significantly to the well-being of the society by assessing other peoples’ transactions to avoid fraudulent activities in organizations. In this regard, auditors can detect the errors or falsification that exists in financial statements hence giving the correct financial position of an organization.
There exist several benefits in the event that an auditor recognises the significance of footnotes that underlie statements of financial performance and position. In this regard, footnotes contain important elements of financial transactions that cannot be presented in financial statements. Furthermore, these notes portray some elements, which contribute to the preparation of financial statements in the manner found by the auditor. Consequently, when an auditor gives some note to the footnotes inclusive of the financial statements, he or she can draw a realistic opinion of the nature of financial statements.
In the event that Sasha Koslvo wishes to start an independent auditing firm, it will be mandatory for her to confirm to the GAAP. These policies dictate that a recognizable auditor should be a CPA. Such credential enables the auditor to become acceptable by any organization. With the experience that Sasha has, she can conduct auditing practices in conjunction with a qualified CPA for her enterprise to be successful. Additionally, the acceptance and approval of Sasha in the market will contribute significantly to her experience and management skills.