To audit loosely means to independently compare something with suitable criteria and give assurance that the compared thing comply or is in line with the criteria.
So to audit means to give assurance to someone about the condition of an item or information owned or prepared by someone else. In the audit, there are always three parties namely someone who does the audit (practitioner), someone who prepare or own item on behalf of another (responsible party) and someone who is going to use the item or information (the user).
Anything can be audited provided that this five (5) things are available:
- Three party relationship
- The subject matter (item or information to be audited)
- Suitable criteria (benchmark to compare the item)
- Sufficient and appropriate evidence to prove that item or information has complied with the criteria; and
- Report to the user about the conclusion reached during the audit.
Things which can be audited may include:
- Financial statements.
- Internal controls.
- Compliance with laws and regulations.
- Performance of machines.
- Human resources operation.