Importance of External Audit for Your Business
Posted: Oct 19, 2018
The process of audit ensures that the your books reflect a true picture of the financial health of the business. There are two types of audits- internal and external. In an internal audit, the evaluation process is carried out in house by the employees of the organization and in an external audit, the evaluation is carried out by an outside firm.
An audit basically provides an assurance to the shareholders that the financial statements of the company are accurate and represented in an appropriate manner. Here are four stages of a financial statement audit.
Stage 1: Planning and risk assessment
The primary stage of audit, planning and risk assessment involves around gaining an understanding of the business in which it operates. This information is used to assess the risks associated with the business and its impact on the financial statement of the organization.
Stage 2: Testing internal controls
At the second step, the internal controls of the organization are tested. This includes checking the security of the computer and reconciling the accounts. The auditor looks whether the assets are safeguarded or not and also looks whether the internal controls are in place or not. If not, the same is reported in the audit report. The auditor then decides whether he should base the financial audit on sample transactions or whether he should test all the transactions. A strong team of professionals offer services for audit in Dubai. They ensure that the organization complies to the requirements specified by the body.
Stage 3: Substantive Procedures
At this stage, evidence is collected that the figures represented in the financial statements are true and reliable. If the internal controls are found to be strong and efficient, auditors rely on this stage. There are different ways in which this stage works. One is conducting an analysis of the financial statements through methods like ratio comparison. Another is a reconciliation in cash and bank. There is examination of the documents and speaking to the management for more information.
Stage 4: Finalization
This is the last and final stage of auditing where the auditor has to compile the reports and present the final report to the shareholders, management and the third parties. There are many types of software available which can be used to perform the audit. It helps review all the transactions in one go without making a mistake.
An audit is important for an organization and it helps build trust and confidence of the users. It is an expensive examination of the financial statements of the organization and it is not something that can ever be ignored. If you do not have adequate knowledge about audit, you can hire professionals for audit in Dubai and they will guide you with the same. Grow your business with the right partners by your side.
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