Sunday, 13 September 2015

Which companies require auditing?

Assuming that your question is in the context of auditing of books of accounts, let me clarify that an audit is not always prescribed under the law or statute.

A statutory audit is one, conducting which is mandatory under the law. For example, in India, all companies registered under the Companies Act, 2013 are required to be audited under the Companies Act. Similarly, business owners with an annual turnover of over Rs. 10,000,000 or professionals with an annual turnover of Rs. 2,500,000 are required to be audited under the Income Tax laws of India.

An internal audit is conducted by the management of any organization just to ensure that another person (at times a professional agency) is reularly checking the working so as to remove errors and avoid frauds.

A forensic audit is conducted to catch frauds where there is good reason to believe that a fraud may be underway or may have already been committed.

A due diligence operation is also a kind of audit when experts audit the operations and records of another organization to determine if the terms of a merger (relating to price consideration) are fair to both parties or not.

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