Audits provide third party assurance to various stakeholders that the subject matter is free from material misstatement.The term is most frequently applied to audits of the financial information relating to a legal person.The word audit is derived from a Latin word "audire" which means "to hear".During the medieval times when manual book-keeping was prevalent, auditors in Britain used to hear the accounts read out for them and checked that the organization's personnel were not negligent or fraudulent.In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements – a concept influenced by both quantitative (numerical) and qualitative factors.
The auditor perceives and recognizes the propositions before them for examination, obtains evidence, evaluates the same and formulates an opinion on the basis of his judgement which is communicated through their auditing report.
Other areas which are commonly audited include: secretarial & compliance audit, internal controls, quality management, project management, water management, and energy conservation.
As a result of an audit, stakeholders may effectively evaluate and improve the effectiveness of risk management, control, and the governance process over the subject matter.
As a result of this, a third party can express an opinion of the person / organization / system (etc.) in question.
The opinion given on financial statements will depend on the audit evidence obtained.