Ultimate Guide On Audited Financials
- June 6, 2020
- Posted by: kgrnaudit
- Category: audit
Every business must keep a record of its financial transactions, dealings, operations, and transfers. Associated chartered accountants then use the information on such documents to create audited financial statements and reports, such as balance sheets, profit and loss statements, and statement of changes. All these reports are very integral to the smooth and efficient running of a company. Of course, audit laws vary from country to country, but some basic rules are standard. The intensity and depth of the chartered accountant report mainly depend on the needs of the company. Now, let us take a look at how audited financials work, why they are essential, and how they are made.
What Are Audited Financial Statements?
An audited financial statement helps make the fiscal records verified, accurate, and credible to external agencies, such as other firms, creditors, and the government. They are essential audit services that help maintain the credibility and trustworthiness of a company. Such statements help in representing the company’s documentation and performance over a fiscal year.
Types of Chartered Accountant Reports
Associated Chartered Accountants mainly perform three different types of examinations, which lead to the creation of a report. They are as follows:
- Compilations: In this case, chartered accountants perform a simple audit service by just compiling available information from existing records. They then go ahead and present it in a prescribed format that makes it easier to understand. Such financial statements are called compilations, as they do not require verification or authorization. However, while creating compilations, associated chartered accountants attach a formal letter stating that the report is a mere representation of facts and that they have not audited or reviewed the data presented.
- Reviews: During reviews, associated chartered accountants use limited procedures to analyze, scrutinize, and format the information available. Therefore, they take longer, cost more, and are also more reassuring that ordinary compilations. The accountants go as far as to make inquiries, check for quality, and try to ensure that the statement does not require significant corrections.
- Audits:An audit is a formal and thorough examination of a company’s fiscal records by an associated chartered accountant. It tests the transactions, financial documentation, and internal controls of the company. Once the audit report is filed, the associated chartered accountant attests for the accuracy of the report, making it the most credible analysis an accountant can provide.
What Are the Stages Of Auditing a Statement?
- Planning:First and foremost, the auditor must understand how the company works, what it does, and what market it caters to. Then, they need to be aware of the user’s needs and requirements, and for what purpose the statement is required.
- Risk evaluation:An auditor should also try to monitor and understand the competitive environment in which the firm or company works. This will help them determine all the risks involved in auditing financial statements. It will also help them assess how people will judge the report and its validity.
- Internal control Testing:Once the auditor knows everything there is to know about the company, they then analyze the company’s internal control procedures and its effectiveness. The various facets they look into involve the preservation of assets, employee authorization, asset protection, and duty separation.
- In case the company’s internal procedures are good enough, the auditor can move on to intense auditing procedures. If the tested controls are ineffective, the auditors will continue testing to see how accurate the company’s financial records are.
- Further Procedures: After the initial testing, auditors will use different investigative processes to verify the accuracy of the financial data given to them. All audited statements are scrutinized and verified again to check for accuracy. Some of the techniques they use are as follows;
- Check with banks to confirm the balances of the company.
- Review and verify all previous bank transactions.
- Check all the authorizing signatures on accounts.
- Count all the cash that is on-hand and integrate it into the records.
- Confirm all accounts of outstanding balances with clients.
- Track all the flow of cash and cheques.
- Analyze the annual sales figures and cutoff processes.
- Observe a physical count of the inventory and inspect all supplier invoices.
- Review production costs, overheads, and inventory costs from the ledger.
- Verify all securities and check their market value.
- Physically inspect all fixed assets and lease contracts.
Types Of Audited Financial Statements
- Income Statement:Such a statement showcases the overall performance of a company within a specified fiscal year. It reports all the revenues earned and expenses incurred during that particular period and reveals the overall net profit or loss. Public companies also include an Earnings-Per-Share figure at the end. Usually, auditors verify such a statement by checking the company’s cash book, account books, and ledgers.
- Balance Sheet: The balance sheet mainly describes the fiscal position of a company at a given time. They are essential to a business, and most banks require such a statement before they grant a loan. It showcases the assets, equities, shares, stakes, and liabilities of the company.
- Cash Flow Statement: Cash flow statements serve as a type of audited financial statements. It describes and reports the cash inflows and outflows of a company during a fiscal year. Primarily, it helps provide the reader with an insight into a company’s ability to meet its obligations and goals in the foreseeable future.
- Audit Opinion Letter: After the audit process, the auditor provides an opinion letter produced as a part of the audited financial statements. This letter states that the company’s financial statements have been reviewed and audited by a certified professional.
Why Do We Audit Financial Statements?
- Lenders need in-depth chartered accountant reports to make well-thought-out and intelligent credit decisions.
- Public companies must file audited financial statements as per the law in many countries.
- Managers and other executives rely on such reports to analyze and monitor the company’s growth and operations.
- Enables auditors to provide their insight and opinion on the financial transactions and operations of the company.
- Helps the company’s management ensure that they are following the right procedures and maintaining an updated account.
- Enables the auditor to help the company set up a proper accounting system to test, analyze, and document its internal controls.
- It helps to identify areas wherein the management has a scope for improvement with regards to their processes, methodology, or controls.
- Serves as a credible assurance to creditors, investors, and other stakeholders.
- It provides a layer of financial consistency to the company, as they showcase true and fair financial records.
What a Good Auditing Service Requires
- Integrity: A good auditing service is honest and sincere in their work and demonstrates utmost professional integrity.
- Confidentiality: Financial audit firms must maintain the confidentiality of all the information provided to them and never disclose such sensitive data.
- Competence: The financial audit firm must perform the work with diligent care and professionalism, and their auditors must have proper training and experience.
- Responsibility: Though a firm can outsource their work to other auditors, the final report will be a testament to their competence, and hence they will be held responsible for the report.
- Documentation: A good auditing firm will be able to systematically and efficiently handle all your documentation.
- Planning: The auditor and the firm backing them must plan all their activities beforehand. This will ensure the completion of the audit report without any delays.
- Audit Evidence: The financial service provider must go after all leads and evidence to check the accuracy of the data given to them.
As per the Economic Substance Rules, UAE, and the UAE Commercial Companies Law, every company must audit their accounts. The UAE Economic Substance Law has made it clear that companies in free zones must audit their books. Furthermore, foreign companies that have branches in the UAE must also submit audit reports every year. Now that you are aware of the importance of audited financials to the wellbeing and smooth running of your company, who will you turn to? KGRN, of course! Here’s a look at why.
Why Come To Us?
Are you looking for a dynamic, customized, and secure financial auditing service for your organization? Well, you’ve come to the right place as we at KGRN provide the whole package for you! We have been recognized as one of the top audit firms in Dubai due to our consistent efforts to provide the best service.
We bring to the table high-quality, well-rounded, highly-customizable, and reliable service. At KGRN, we are not just concerned about the numbers in your audit book, but rather do everything required to give you great service. We thoroughly understand the key risks in business, how that translates into financial statements and can check to see if your controls are in place.
Keeping our client’s needs a top priority, we will give you tailor-made plans, which will help you scale your business efficiently. Our data-driven approach and in-depth assessment will help you grow your organization in a way you never thought possible. We adopt a risk-based approach as well, analyzing and managing significant risks in all sectors.
KGRN Audit and Accounting Firm:
Our firm invests in smart tools to ensure efficiency and give our clients more value, which helps keep your organization at the forefront of change and innovation. With an extensive understanding of the business culture and processes, we offer guarantees that are capable of mitigating risks. We also offer efficient and effective governance processes that ensure you meet your organizational goals.
Meeting the changing needs of your company requires an audit to be more than just strategic or practical. KGRN’s audit team has an array of experts that approach plans with a quantitative and qualitative perspective. Our team members use a risk-based model relying on a detailed understanding of every nook and corner of your business and internal controls, interweaving solutions with technology and well-planned business conversations to boost your audit from compliance to insight, every step of the way. So, let us help you set your record straight and grow your company, one fiscal record at a time!
For enquires call @ +971 45 570 204 / Email Us : firstname.lastname@example.org