Any company, regardless of its size, must register each operation that it carries out, each sale that it obtains. Moreover in short, record every entry and exit of money that exists. In this way, financial information is reliably and really controlled. To give credibility to the accounts of the company, it is necessary that from time to time a financial audit be carried out. Because while everything is going well, there is no problem. However, what happens if there is a crisis in the company? The accounts are going to be the first ones that will be subject to review. Actually that is why it is one of the most important types of audits we can find.
The financial audit, also known as the accounting audit. It is a method by which the information that a company has reflected in the statements of its accounts is examined and analyzed. This audit may be carried out by an internal or external auditor of the company. However a private sector auditor, not the public, as in the case of the tax audit.
The purpose of the accounting audit is to determine that the statements of accounts. Along with the records made by the companies or corporate entities. Actually comply or not with current accounting regulations, without hiding vice or bad faith. Nor hiding or camouflaging some state (think of bankruptcies, lack of solvency and liquidity, etc.).
The financial audit examines the statements of a company’s accounts and analyzes whether or not it complies with the accounting regulations.
Within the private sector, it is common for companies to hire a specialized auditor. Basically who performs said accounting audit; it is advisable to do it every so often. However, it is not uncommon to see that in large companies they have their own department that conducts the audit.
After carrying out the accounting audit, the auditor must issue a report in writing, as a business document. Also following the standardized format established by the Accounting and Audit Institute (ICAC) and the International Accounting Standards that exist.
More From Business Study Notes:- Audit Report
What will contain in an accounting audit report?
- Identification of the company that is being audited, which is subject to the accounting audit.
- General description of what the accounting audit will cover
- Technical opinion by the auditor.
- Opinion on the agreement or not of the management report with the accounts. Basically informing about possible deviations between what is reflected by the company and reality.
- Date and signature of the auditor who made the report of the accounting audit
Procedure of Financial Audit
Rarely do SMEs undergo an accounting audit with such rigor as large companies can do. Therefore, it is worth knowing the basic procedure. So that the entrepreneur himself can perform an accounting audit. Moreover learn more about the status of their accounts.
Make an audit trail
The best advice is to use accounting software to keep a complete and reliable record of all financial activities. That actually easily analyzing any movement.
Review of registration policies
It is fundamental that we have the information organized and that it is reliable and safe. That is from the canceled and canceled checks, to the product returns, everything. Having the information well stored, it will allow us to be accessible. Moreover in case of any deviation, it will be easy to detect the mismatch and, above all, the origin of the problem.
Process of delivery of accounting documents to the accounting department
What method is used to file invoices, receipts, bank account statements, etc.? How is that information transferred to the accounting department? We must design an agile and reliable process.
System to monitor the internal control of the company
For example, that the person in charge of the books, is not the same person who manages the money in cash. So internal control is much easier and more agile when it comes to detecting any possible scam.
Accounting laws to Follow
Adopt the procedures and official formats when making the accounting record, it will facilitate the task in a medium term. Hence these procedures are governed by the General Accounting Plan.
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