What is the Audit Function?

The audit function is known as a subtitle of management functions. The audit function, which is known for controlling whether the planned activities, in line with the purposes of management, are being carried out and, if carried out, how correctly and effectively they are done, ensures that employees maintain an organized structure simply by its existence. In addition to ensuring this order, the audit function also examines financial information and records. Thus, the audit function enables information users to access the information they request within certain standards, and plays a significant role in identifying errors and omissions.

So, what are the characteristics of the audit function?
• The audit function, conducted to examine the financial condition of an institution or organization, is a systematic procedure.
• The audit function serves many different purposes, primarily aiming to detect errors, fraud, and corruption.
• It helps to ensure that all transactions managed by institutions or organizations are carried out in accordance with accounting procedures.
• As a result of the analysis of financial statements prepared in a correct and honest manner, it provides assurance regarding the relevant transactions.

Based on the characteristics mentioned above, it can be concluded that the audit function serves many purposes and brings many assurances along with these purposes.

Why is Audit Necessary?

There are many reasons for an institution or organization to need an audit. The reasons in question are mentioned and explained below.
• They meet the requirements of institutions or organizations in a manner compliant with existing regulations.
• They provide the necessary assurance to the investors held by institutions or organizations.
• They review the control of the processes carried out by institutions or organizations.
• They prevent errors and fraud.
• They provide security about the continuity and financial conditions of institutions or organizations.

Based on the listed areas of use of audits above, it is deemed necessary to conduct audits in order for institutions or organizations to save time and costs in the long run. Besides this mentioned aspect, audits are examined under two separate types. These types are explained below.

Mandatory Audit

These are the audits that are required to be conducted periodically according to legal regulations and legislation. The mandatory audit process, in which financial statements are audited according to generally accepted accounting standards, is briefly defined as the auditing of compliance with legal regulations.

Voluntary or Extraordinary Audit

These are audits conducted for various reasons that will not be bound by any period. This type of audit, based on the auditing of accounts and financial statements related to the occurrence of a particular event, is briefly defined as a summary audit.

Based on the explained types of auditing, it is seen that institutions or organizations need to conduct audits both to measure their compliance with the law and to obtain the source or summary of an issue.

Which Companies are Subject to Audit?

There are various conditions to be subject to an audit. The conditions in question are listed below.
• Total assets of 30 million Turkish Liras
• Annual net sales revenue of 40 million Turkish Liras
• Number of employees: 125
• Total assets of 15 million Turkish Liras
• Annual net sales revenue of 20 million Turkish Liras
• Number of employees: 150

When considering the first three conditions listed above, companies that are considered as large or medium-sized companies are those that exceed the threshold amounts of at least two in consecutive accounting periods. When considering the last three conditions mentioned above, companies that are not publicly traded in organized markets and fall under the scope of Capital Markets Board (CMB) are also subject to audit if at least two of those three criteria exceed the threshold amount in consecutive accounting periods.

Besides the mentioned legal obligations, companies may also be subjected to audits due to various reasons. The situations requiring audits are explained below.
• In order to obtain financial support for planned investments
• So that stakeholders such as the company’s board of directors, manager, or investor can understand that the company operates correctly
• For the growth of the companies
• For the shares of the companies to be traded

Based on all these examples of companies subject to audit, it would be reasonable to say that there is a place for audit in every aspect of commercial life.

Who Needs Audit?

The concept of audit has become quite popular due to its ability to identify shortcomings. Therefore, many institutions or organizations want to integrate this concept into their business practices. Some individuals or institutions carry out the audit process not only as a request but also as a necessity. The group needing an audit is clarified below.

• Partners
• Managers
• Lenders
• Those who want to be partners
• Public institutions
• Other decision-makers

Looking at the mentioned individuals or institutions, it can be concluded that the concept of audit has found its place in many areas. The concept of audit, which emerges as vital for a healthy business life, is seen as a supportive resource by institutions or organizations. The fundamental reason for this is that audits continuously provide determinations of deficiencies, corruption, and errors.

What is an Audit Report?

It is necessary to mention the report of the audit concept, which we continually emphasize as a significant need. An audit report is a report prepared by an auditor that contains information and opinions regarding the financial statuses of institutions or organizations. In the formation of this report, the auditor must prepare the financial statements in accordance with relevant regulations, comply with legal requirements, and ensure the submission of the report in a procedural manner. After considering these factors, the audit report, containing the opinions of the auditor, does not always contain positive elements. On the contrary; the audit report can also have results such as qualified positive opinion, refusal to express an opinion, or negative opinion, which are of great importance for the operations of institutions or organizations.

What are the Benefits of Audit?

The advantages of audits, which are always emphasized for the importance to institutions or organizations, have become a subject of curiosity. Therefore, it is perceived as essential to include these advantages while discussing the audit. The advantages are listed below.

• Audits assist in guiding the decision-making process regarding important decisions to be made in institutions or organizations. Thus, they stand out by providing assurance.
• They ensure the detection of errors or fraud present in institutions or organizations.
• Audit, which enables institutions or organizations to obtain professional opinions, offers an effective perspective on management.
• It ensures that employees focus on their responsibilities.
• It increases the reliability of financial statements of institutions or organizations.

Based on the deductions made from the advantages listed above, it is seen that the concept of audit is quite beneficial in corporate life.

What are the Disadvantages of Audit?

Along with having advantages, the concept of audit also has various disadvantages, showcasing its dual nature. So, what are these disadvantages?
• It creates an additional cost item for institutions or organizations.
• It may cause discomfort and stress among the employees within institutions or organizations.
• Although it is known for providing assurance, it does not provide absolute assurance.

When examining these disadvantages, it becomes evident that the element of audit, even if it does not seem so, is a concept that requires attention. Therefore, audit processes should be carried out meticulously and carefully.