Audit in the Financial Context

Auditin the Financial Context

Auditin the Financial Context

Themanagement of finance is one of the most critical functions of theorganizational management. An effective management of financerequires interim and the end of the year audits. Audit refers to theprocess used to examine the financial records of organizations by anindependent individual or an accounting firm (Dongen, 2015). The mainobjective of the audit procedures is to allow the auditor to expresssome opinion on the fairness, as well as the truth of the financialrecords.

Theaudit procedures can prevent the future frauds, but not the fraudsthat have occurred in the financial year in question. Financial auditis carried out with the objective of detecting the errors and fraudthat have already occurred and reporting them (Freeman, 2013). Thisimplies that audit procedures cannot prevent the occurrence of errorsand fraud in the present financial year, since they are onlyperformed to determine the accuracy and the fairness with whichfinancial transactions have been reported in the organization’sfinancial records. However, effective audit procedures that revealall or nearly all errors and frauds in the current financialstatements can instill fear in managers who are responsible for themanagement or the organizational finances. This means that effectiveaudit procedures can have an indirect influence the conduct ofaccountants in the future, thus preventing errors and audits in thesubsequent financial periods.

Accountingfor the non-profit health care organization and other industriesdiffers in three major ways. Financial accounting is mainly performedto facilitate the process of decision-making (Cleverley Song &ampCleverley, 2011). First, although all organizations are required tocapitalize and depreciate their fixed assets, non-profit health careorganizations are given special treatment for some of their assets,such as buildings (Green, 2013). Secondly, most of the non-profithospitals use cash-basis, while most of the businesses in otherindustries use accrual accounting. Third, non-profit hospitals reportexpenses via functional classification (Green, 2013). In conclusion,audit is a critical process that helps in the determination of thetruthfulness, accuracy, and fairness of the accounting records.Accounting for non-profit firms and firms in other industries differslightly.

References

Cleverley,O., Song, H. &amp Cleverley, O. (2011). Healthcare finance (7thed.).Sudbury, MA: Jones &amp Bartlett Learning LLC.

Dongen,P. (2015). What is an audit? PWC.Retrieved January 14, 2015, fromhttp://www.pwc.com.au/assurance/financial/statements/audit.htm

Freeman,J. (2013). Auditprocedures to detect fraud.Santa Monica: Demand Media.

Green,J. (2013). Themajor accounting differences between profit and non-profitorganizations.Santa Monica: Demand Media.