Auditing
Auditing forms amost important branch of accountancy. Once accounts have been prepared, they may have to be checked in order to ensure that they do not preser a distorted picture. The checking of accounts and the reporting on them is known as auditing. Not all businesses have their accounts audited, but for some organisation (such as large limited-liability companies) it is a legal requirement.

Auditors are usually trained accountants, who specialise in checking accounts rather than preparing them. If they are appointes from outside the organisation, they are usually referred to as external auditors. A limited company’s auditors are appointed by the shareholders, and not by the management. The auditors job is to protect the interest of the shareholders. they answer to them, and not to anyone in the company. They are appointed by, and answer to, the company’s management.

Internal auditors perform routine tasks and undertake detailed checking of the company’s accounting procedures, whereas external auditors are likely to go in for much more selective testing. None the less, they usually work very closely together, although the distinction made between them still remains important.

It might occur that because internal auditors are employees of the company they must have much less independence than external auditors. In practice, however, even external auditors have limited independence. This is because the directors of a company usually recommend the appointment of a paticular firm of auditors to the shareholders. Is is rare for shareholders to object to the directors’ recommendation, and so if the directors are in dispute with the auditors they can always hint that they are thinking of appointing another firm. The auditors can always appeal to the shareholders, but they are not usually successful.