FINANCIAL AUDIT:
A financial audit is the examination of an entity’s financial statements and accompanying disclosures by an independent auditor. The result of this examination is a report by the auditor, attesting to the fairness of presentation of the financial statements and related disclosures. A financial audit is an independent, objective evaluation of an organization’s financial reports and financial reporting processes. The primary purpose for financial audits is to give regulators, investors, directors, and manager’s reasonable assurance that financial statements are accurate and complete.
The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework.
PROCEDURE:
Following steps requires while conducting financial audit:
- Review the systems put in place to transmit financial information.
- Look into the company’s record-keeping policies and check to ensure records are being stored.
- Identify and review each element of the company’s accounting system, including individual Accounts.
- Check into the company’s internal controls policies to gauge the level of protection they provide.
- Compare internal records of cash holdings, income and expenses against external records.
- Analyze the company’s internal tax records and official tax returns.
Advantages of an Audit:
A professional audit provides benefits to several different parties.
For the officers of a company: the audit provides an external confirmation of the company’s financial health that confirms their good management.
For stockholders: the financial audit is a critical means of establishing the worth of the company.
For the business community: regular audits enhance the company’s reputation and make it a desirable business partner.
For the company’s lenders: financial audits are a prerequisite for almost any kind of business loan.
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