Trading places
A KPMG case study

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Page 2: What is an audit?

Kpmg 4 Image 2Audit originates from the time of the agricultural economy. Landowners made their money by charging their tenants a proportion of the income they made from the land. In order to find out how much the landowner was due, he employed people to visit their properties and report back how many crops were produced. The landlord then decided what his share was. The term auditor originates from the Latin word audire, meaning to hear the report related by the auditor.

According to the Institute of Chartered Accountants in England and Wales, an audit is ‘an independent opinion on the truth and fairness of the state of the affairs of a company at the period end and of its profit or loss for that period.’  Modern auditing has developed alongside the modern limited company. A company is a separate legal entity quite distinct from its shareholders. The shareholders require safeguards. This is particularly true where the shareholders are not also the directors of the company.

The financial statements prepared by the directors are effectively accounts of their stewardship of the assets in which the shareholders have invested. The Companies Act 1900 first introduced the requirement for an annual audit of those financial statements. The auditor is appointed in most cases by the shareholders and this is a contractual relationship.

KPMG

At the heart of the KPMG Audit Service is its ability to provide an independent audit report combined with a high quality, professional service. KPMG’s specialists take on the role of business advisers, enhancing the quality of a standard audit to provide valuable advice on many business matters.

KPMG’s range of services stands apart from its competitors due to the understanding of the client’s business which its specialists apply to better identify problems. This then enables KPMG to make constructive suggestions for improvements and make available the professional services that are appropriate to the business

KPMG | Trading places
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