External and internal Audit
An external audit can be conducted either as part of the annual review of accounts or as a special review by a donor agency. It is conducted by a registered firm of accountants with recognized professional qualifications, such as CPA, ACA or ACCA.
Auditors are appointed by the Board of Trustees (or Annual General Meeting) or by a donor for a special audit. They are independent of the organization engaging them. Being independent means that the auditor must not have been involved in keeping the accounting records and is not personally connected in any way with the organization being audited.
An internal audit is the examination, monitoring and analysis of activities related to a company’s operations, including its business structure, employee behavior and information systems. Internal audit regulations have increased corporate requirements for performing internal audits. Audits are important components of a company’s risk management as they help to identify issues before they become substantial problems, such as attempts to steal intellectual property.
Bookkeeping is the recording of financial transactions an is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization / Corporation and bank transaction.
Bookkeeping is the process of identifying and recording transactions and other financial events affecting an enterprise in a systematic way. Transactions refer to the trading activities or buying and selling that every business needs to record. A financial event could be any change in the value of a business, such as theft or damage to property that also needs to be recorded. For hundreds of years the owners of businesses have needed to rely on financial records kept by bookkeepers. Such records have little value unless they are accurate and reliable.
Accounting is broader than bookkeeping and refers to the process of classifying, interpreting, summarizing and reporting on transactions and other financial events. This is done in order to generate useful information from the many different types of purchases and sales that are individually recorded by bookkeepers.
An example of useful information is a daily sales report for a particular product in order to determine if an advertising campaign has made any difference to sales. By producing such a report, the sales transaction data recorded by the bookkeeper is organized into a meaningful form that will help the accountant to decide if sales for the relevant period have changed as a result of the advertising.