Why Do We Do Financial Audits In 2023?

The company keeps records of all financial transactions. Accountants manage and maintain these records and create reports based on them. A company’s financial statements can be used both internally and externally. Management typically uses detailed data daily, weekly, and monthly to control the company’s performance and productivity.

Detailed data helps companies set goals and determine whether they have been successfully achieved. Internal management, shareholders, investors, financial institutions, and agencies are interested in monthly, quarterly, and annual data. In addition, we have performed audits to ensure that the financial statements presented are fair and accurate.

A financial audit analyzes a company’s financial records and determines whether they are accurate and free of wrongdoing, misrepresentation, or financial mismanagement. Audit reports must also be submitted to certain authorities and organizations.

What is a financial audit?

An audit is the auditor’s analysis and verification of a company’s financial statements and records. Financial auditors examine a company’s records and statements to see if they accurately reflect its financial position and transactions. The accounts are also examined to see if they follow generally accepted accounting standards and for any errors or improprieties in the calculation and production of the financial statements.

In addition to financial records and statements, an audit examines the effectiveness of a company’s internal controls. Audits examine accounting processes and help identify ways to simplify and improve those processes. Provide expert opinion on whether processes can be improved.

The board of directors or management usually selects auditors. They were selected as people who needed more connection to the company’s business or accounting processes. This ensures an objective and unbiased audit of the company’s accounting systems, controls, and financial statements. Moreover, investors, shareholders, and owners of the firms can rest assured of the financial statements’ validity. Audits also ensure that the financial accounting practices follow generally accepted accounting standards and company policies. This avoids tampering with financial statements using erroneous calculations and accounting practices.

There are two major types of audits that companies can conduct: external audits and internal audits.

External audit

External audits are performed by auditors or audit firms. They are impartial auditors who scrutinize a company’s financial statements. The primary objective of an external audit is to ensure that a company’s financial statements are correct. In addition, the external auditor will attempt to determine whether there are any misstatements in the financial statements. External audits give stakeholders the confidence to make important decisions based on the company’s published financial statements.

A company’s accountant may be used to using a particular process or procedure. However, external auditors examine the accounts to see if they comply with generally accepted accounting standards. Companies may also have internal controls. External auditors will be able to determine whether these controls are adequate. However, the external auditor is not invested in the process, and he is impartial. 

External auditors will be able to assess processes and controls objectively. The auditor’s expertise and experience will help companies improve their processes and controls continuously.

Internal Audit

Company employees carry out internal financial audits. They report directly to management, and their reports are used internally. The internal audit determines whether a company’s controls are adequate and whether operations perform as expected. Since internal auditors are part of the process, they are less likely to be critical of the process. Because financial auditors evaluate their processes and procedures, they need to be more objective.

Internal audits provide feedback to management based on their decisions. Internal audit also verifies the accuracy, compliance, and completeness of records. Moreover, internal audits are performed more frequently than external audits and can be used to identify employees or departments whose records are not being appropriately maintained. Regular internal audits bring consistency to a company’s financial accounting procedures and help the company prepare for external audits.

Why Do Financial Audit in 2023?

Here are the reasons and advantages of financial auditing are:

Consistency and Compliance

Auditors are experts in financial accounting standards and local laws and regulations. If a company fails to comply with accounting standards or the law, whether intentionally or not, an audit may determine this

Effective Systems and Controls

An objective assessment of a company’s internal processes and controls can provide valuable information. In addition, regular audits help companies develop their systems and controls to be effective.

Easier Insurance Claims

Insurance claims are usually only paid once a full audit has been performed to verify the value of the claimed loss. With regular audits, the insurer will know the claim amount is correct.

Check gain or loss

Audited financial statements clearly describe the financial condition of the company. One of the benefits of a financial audit is that you can determine whether the company is making money or losing money or if there are problem areas. Audited financial statements are an essential management tool for making informed decisions. Comparing subsequent reports can also help determine if any policy changes have affected financials.

Get financing and investment.

Audited reports enhance the company’s reputation and reliability. Plus, a company with an authentic track record of maintaining audited financial reports is more attractive to investors and financial institutions. Hence, attracting investment and lending is more accessible when the company has a set of audited reports.

Easier to filter

If the company is liquidated or sold, the company must be properly valued. Audited financial statements show the value of a company’s assets and liabilities. Facilitate searches and negotiations with buyers while auditing documents.

Easier Tax Calculations

The amount of tax a company must pay depends on the earnings in its financial statements and other factors. Audited reports are essential for accurate tax calculations. In addition, specific government reports require audited reports.

Fraud detection

Unfortunately, fraud and embezzlement exist in some organizations. Regular audits can help detect these cases of fraud. Financial auditors can also help companies take appropriate action against violators. Financial audits also serve as a preventive measure for potential criminals, who will be less likely to attempt fraud when they know the account will be closely monitored. Fraud prevention is also one of the benefits of financial auditing.

Better planning and budgeting

Regular collection of reliable financial documents can help identify business trends. Accurate reporting provides management with the information they need to make better decisions. Financial statements help companies plan for the future and allocate budgets. Better decision-making makes companies more competitive and successful.

Evidence collection

If the auditors find wrongdoing, the financial audit process gathers the necessary evidence to prove wrongdoing. Auditors cannot make allegations of misconduct without such evidence at hand. Once there is evidence of wrongdoing, it is difficult for criminals to cover their tracks.

Increase credibility and reputation.

When auditors report that all accounts are sound, it increases the confidence of a company’s board of directors, owners, and stakeholders in management. It also improves the morale of the company’s employees, who know their work is being audited and well done. After a positive audit report, the company’s image, respect, and goodwill are boosted.

Final Thoughts 

A company needs to utilize the services of the best auditing company in Dubai for an effective financial audit. So contact us today, and we’ll be happy to help you. If your financial statements need to be audited, the VVAS team will ensure your business gets real value from the audit. Our expert financial auditors will help your firm prepare for a flawless financial audit and review your audit. An audit initiated by a VVAS manager can also give your company the edge it needs.

We have worked with public companies, private companies, large and small, not-for-profits, and self-managed superannuation funds (SMSFs). If you have any questions about a financial audit and what it means for your company, please call us or email us, and a member of our financial auditor will contact you.

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