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The Importance of an Audit of Financial Statements

Importance of Financial Audits

For accountants who are responsible for project formulation, financial statements are the corollary of their work and the culmination of their efforts. For entrepreneurs and managers of businesses, this allows them to take actions and decisions they deem appropriate for the proper conduct of the business.

This situation can be summarised in the financial statements, whereby they record the financial results for the integrated management of business that the organisation runs. This information is of interest to various sectors, such as:

– The owners and / or shareholders and those fully interested in knowing the results of the economic entity.

– The directors and officers are interested in the excellent conduct of the business, to know if you are meeting the objectives established.

– Administration: To guarantee the proper administration of the institution in accordance with its goals and objectives.

– Supervisors and control bodies: Those that manage audited financial statements give credibility to your financial information.

– Government bodies: Interested in the financial statements that are audited by aspects of formality and regulation.

– Workers : As a means of feeling security in their employment.

– Suppliers and creditors: Because they are interested in liquidity and fairness of the financial statements.

– Investors: Because they will be able to analyse, to invest or not to invest in certain types of business.

– To the general public: To know whether a particular organisation has a good picture of trade, if there are good services, products and whether they have quality.

Under this perspective, the audit of the financial statements involves an examination of the financial statements of its operations holistically, including media, economic, administrative, financial / accounting, legal, environmental etc. An established, well respected company such as can help with this aspect.

Due to the above, the financial audit should not only aim at the verification of the accounting record, but also the detailed examination of the actions of the organisation, areas, processes, licenses, operations, records and support in a responsible manner to be as efficient as possible.

In that way a financial audit process requires consideration of, among others, the following:

– Understand the organisation, policy, regulations, structure, processes, financial reporting and accounting handbook with your chart of accounts.

– Prepare guidelines, programs or questionnaires for an audit and internal control and other working papers, based on the representative account.

– Know the computer applications that manage the organisation, especially accounting and finance.

– Review the different accounts assigned to the financial statements, considering the accounting, financial, administrative, legal, economic, environmental or otherwise. Determine for each of them, the cause, effect and impact as well.

– Translate in technical working papers, supported and objective manner, each of the findings, to be considered in drafting the final review report.

With respect to internal control you should:

– Evaluate the quality of information systems and media in the accounting process.

– Check profiles of who will be able and responsible for handling and recording of accounting functional areas.

– Verify proper handling of correspondence and memory of the organisation file.

– To verify the existence of control processes that perform the accounting area of dependencies and other sources of accounting information.

– Monitor an Improvement Plan,

Another insightful blog post produced by Your Virtual Office London.

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