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Audit Function As A Performance Measurement Tool


Audit Function As A Performance Measurement Tool

Management controls, auditing, and evaluation are processes and mechanisms that are designed to assure that budgeting is linked to the real world of program operations. Without these links, there would be considerable risk that decisions would be based on flawed information, that resources are mismanaged, and that the decisions would be ignored by the operating organization.

Auditing is an accounting process used in business. It uses an independent body to examine a business financial transactions and statements. The ultimate purpose of this form of auditing is to present an accurate account of a company financial business transactions. The practice is used to make sure that the company is trading financially fairly and also that the accounts it is presenting to the public or shareholders are accurate and justified.

The results of the audit procedure can be presented to shareholders, banks and anyone else with an interest in the company. One of the main reasons for a financial audit is to ensure that the trading company is not practicing any deception. This is why it is done by an independent third party.

According to Lawrence R. Dicksee, 
"An auditing is an examination of accounting records undertaken with a view to establishing whether they correctly and completely reflect the transactions to which they purport to relate".

According to A.W. Hanson, 
"An auditing is an examination of such records to establish their reliability and the reliability of statements drawn from them".

Auditing in its modern form has adopted a multi-dimensional approach. At present, the scope of auditing is not restricted to only financial audit under the Companies Act. The purpose of auditing has been extended to cost accounts, managerial policies, operational efficiencies, system applications, social implications of business organisations and environmental aspects too. Even non-business organisations avail the services of qualified auditors and get their accounts audited. At present, the field of audit also covers the following :
  1. Checking cost accounting records and verifying the cost accounting principles that have been adopted in preparing and presenting cost accounting data, i.e., cost audit. 
  2. Comprehensive examination and review of managerial policies and operational efficiency, i.e., management audit. 
  3. Checking the performance of the organisation and comparing it with the overall performance of the industry in which the organisation belongs, i.e., performance audit.
  4. Critical examination and analysis of the contribution of the organisation for the benefit of the society, i.e., social audit.
  5. Evaluation and measurement of efficiency of the human resources in the organisation and comparing it with the expected utilization of the human resources as a whole, i.e., human resource audit.

Performance Measurement Tool as a Audit Function

Audit Function As A Performance Measurement Tool

Following are the different audit function as a performance measurement tool :

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