Everything You Need to Know about Financial Audits from yaydohorku's blog

An audit is simply a quality control measure to ensure the accuracy of your financial records.

Many businesses conduct internal self-audits annually to ensure the accuracy of their books. External audits might be required if you’re applying for business certifications, preparing for a merger or acquisition, or due to regulatory requirements.

In general audits are in place to provide assurance that your financial records and tax returns are accurate, complete, and in compliance with accounting standards and relevant regulations.

What exactly is an audit?

A financial audit is an objective examination and evaluation of the financial statements of an organisation to make sure that the financial records are a fair and accurate representation of the transactions they represent. Using checklists and interviews, auditors determine whether a business has its affairs in order and under control, in accordance with relevant standards, requirements, and/or objectives. They then present their findings in an audit report.

But why conduct audits?

The main purpose of an external audit is to validate a company's financial statements and to provide independent assurance of the accuracy of financial reports.

These are the most common reasons for conducting an audit:

  • to reassure customers, or suppliers of the accuracy and viability of your financial records;
  • to check the effectiveness of financial safety measures;
  • to verify the reliability of accounting/reporting procedures.
  • to determine if there has been any wrongdoing within the company 

An external audit would be necessary in order to verify the reliability of your internal accounting procedures.

What are the 3 main types of audits?

There are three main types of audits: external audits, internal audits, and forensic audits.

  • External audit: This type of audit is done by external firms that are qualified to do an audit.
  • Internal audit: This is an audit done by the audit committee and boards of directors of the company itself,  who are authorised for auditing.
  • Forensic audit: This type of audit is done by a forensic accountant who has specific skills in the parameters of accounting and investigation.

What to look out for when choosing an external auditing firm.

Choosing the right external auditing firm is an important decision that can have a significant impact on your business’s financial health, reputation, and compliance with legal and regulatory requirements.

  1. Reputation and Experience: Look for an auditing firm with a good reputation and a solid track record.
  2. Qualifications: Check the qualifications and credentials of the auditing firm's staff, including their professional certifications, experience, and education.
  3. Independence: Make sure the auditing firm is independent and objective, meaning that they do not have any conflicts of interest or relationships that could compromise their impartiality.
  4. Communication and Reporting: Look for an auditing firm that communicates well and provides clear, concise, and actionable reports.
  5. Technology and Data Security: Consider auditing firms that have invested in the most up-to-date accounting software to improve the efficiency and accuracy of their work. They should also have strong data security protocols in place to protect your organization's sensitive financial information.
  6. Cost: Consider the cost of the auditing services and ensure they align with your budget and financial outlook. However, you get what you pay for! A low-cost audit may not provide the same level of quality and expertise as a higher-priced one, which can result in costly errors and legal issues down the line.

Overall, take the time to carefully evaluate each potential external auditing firm, and select the one that best meets your organization's needs and expectations.

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Getting in extra hands that understand the audit process and can help your team with preparation of audit packs, answering the multitudes of audit queries, and everything else required to get the audit over the line. Plug in Outsourced CFO’s accounting experts with audit backgrounds to help you and your team get this year’s audit done on time. For more information, visit www.ocfo.com

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