THE ROLE OF AUDITING IN THE SUCCESS OF BUSINESS ORGANIZATIONS
There are many types of auditing. These are quality auditing, project-management auditing, energy auditing and accounting auditing. All of these are primarily done to benefit the company by leaps and bounds and ensure the success of the business organization in the long term.
Quality audits refer to auditing the organizations compliance to quality standards, such as conformance to the International Standardization Organization (ISO). Quality auditing is beneficial for the organization especially that it ensures efficiency and effectiveness of an organization’s total quality management system, which means that it enhances performance and discipline of employees vis a vis a quality standards (Delpha Quality Consulting, n.d.). It is a very thorough documentation done periodically by an external auditing party to check on the quality and performance standards of the company (Adarshk, n.d.; Business dictionary, n.d.) Non-conformance to quality standards such as the ISO can revoke the company’s certification (Adarshk,n.d.).
Project management audits the project management cycle whether it has met its goals or not (Wikipedia, 2011). Project management audit provides the organization a check on the status of the project by looking into risks, threats, opportunities, issues and concerns in the different stages of the life cycle of the project (Stanleigh, 2009). It is done regularly by members of the organizational team to assess the performance of the team members vis a vis their strategic goals. (Orfano, 2009).
Energy audit is a new thing, a green-energy endeavor, which monitors consumption of energy and energy conservation. Energy audit is a new byword in the audit world concerned with the consumption of energy and the search for opportunities to reduce cost to make the company energy efficient (Energy Audit, n.d.). Energy audit appeals not only to environmentally conscious investors but also to investors who want to ensure that the company reduces overhead costs through energy conservation measures (Gard Analytics, n.d.).
Accounting audit is the most common type of audit. It is usually the type of audit that we think about when we hear the word audit or auditing. There are two types of accounting audit, external and internal audit. Large companies owned by a number of stakeholders usually relegate the responsibilities to the board of directors the responsibility of ensuring the success of the company. These stakeholders employ independent auditing firm, not primarily to detect fraud and error but to check the financial statements whether they reflect the real state of the business. The external auditors are thus expected to be objective and incorruptible. (Mtetwa, 2011). They make sure that the accounts of the company are protected by the Board of Directors and that the shareholders’ interests are protected (About Everything, 2009). The internal auditors on the other hand, are employed by the organization. They monitor and assess activities of the organization to ensure proper accounting of their financial and non-financial systems. (Institute of Internal Auditors, 2010)
All the four types of auditing mentioned above contribute to the success of the business organization as they manage the organization’s quality standards, the project cycle, its energy consumption and conservation measures and lastly the financial part of accounting which looks at the health of the organization in terms of its financial condition. Auditing whether it is accounting, energy, project performance or quality auditing is imperative to the survival of the organization in the business world. They ensure a comprehensive and systematic financial record and company records, assess risk financial or otherwise, uncover fraudulent activities, establish stringent measures to avoid irregularities, strengthen the organization by reinforcing internal control, facilitate the identification of key areas for improvement and evaluation, and adoption of new technology. (Explore Auditing, n.d.) An up-to-date accounting audit benefits the company by ensuring an easy access to loan, easy valuation of property, and to attract new business partners. A comprehensive and well-organized accounting record and system allows banks to assess the organization through the books and award loan application in less time. Likewise updated and organized accounting systems allow not only bankers but the management and investors to check the current value of the company’s assets. Investors look into the financial statements to make sure that the company is in a healthy state before investment decisions are made. Accounting systems are updated and systematized to make it available not only to the management but also to the public to facilitate entry of prospective investors into the company. To the state the audit facilitates efficient and effective taxing mechanism. (About Everything, 2009). Internal auditing specifically, benefits the board of directors to ensure that the whole organization has its systems in place, its processes working, and its resources well accounted for. (Swanson, 2010)
REFERENCES:
About Everything, 2009. Advantages of Auditing. [online] Available at: <http://www.about-everything.info/2009/02/12/advantages-of-audit/> [Accessed 5 May 2011]
Adarshk, n.d. What is audit Quality? [online] Available at: <http://www.ehow.com/facts_6027977_audit-quality_.html> [Accessed 6 May 2011]
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Delpha Quality Consulting, n.d. ISO Quality Audit for ISO 9001 and other ISO standards . [online] Available at: <http://www.delphaqualityconsulting.com/isoaudit.php> [Accessed 5 May 2011].
Energy Audit, n.d. Energy Audit. [online]Available at: <http://www.powermin.nic.in/distribution/energy_audit.htm> [Accessed 5 May 2011]
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Institute of Internal Auditors, 2010. How do internal and external auditors differ and how should they relate? [online] Available at: <http://www.theiia.org/theiia/about-the-profession/internal-audit-faqs/?i=1086> [Accessed 5 May 2011].
Mtetwa, M., 2011. What is the Role of Auditors. [online] Available at: < http://www.suite101.com/content/what-is-the-role-of-auditors-a347335> [Accessed 5 May 2011]
Orfano, F., 2009. Project Management Audit Process. [online] Available at: <http://www.brighthub.com/office/project-management/articles/32883.aspx> [Accessed 6 May 2011].
Swanson, Dan., 2010. Internal Auditing and Fraud Investigation. [online] Available at: <http://www.facilitatedcontrols.com/internal-auditing/risk.shtml> [Accessed 5 May 2011].
Stanleigh, M., 2009. Undertaking a Successful Project Audit. [online] Available at: <http://www.projectsmart.co.uk/undertaking-a-successful-project-audit.html> [Accessed 5 May 2011]
Wikipedia, 2011. Audit. [online] Available at: <http://en.wikipedia.org/wiki/Audit> [Accessed 5 May 2011].
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