Auditing

Along with bookkeeping, FINANCIAL ACCOUNTING, and MANAGERIAL ACCOUNTING, auditing is one of the branches of accountancy. Auditing—the process of examining the
books and records of a business, agency, or organization to determine the accuracy of the accounts contained therein—verifies that the accounting system accurately represents and reports the transactions that have occurred over the past year.

External auditing is performed by accounting firms or by accountants who are not a part of the organization being audited. Fund-raising organizations, charities, and CORPORATIONs publishing their ANNUAL REPORTs regularly use external audits to provide impartial, objective reviews of their accounting systems.

Internal auditing is performed by accountants who are employees of the firm being audited. Internal audits check for conformance to a firm’s own policies as well as to accounting standards. Because internal audits a e performed by accountants within the firm or organization, such audits are not considered to be as impartial and objective as external audits.