Accounting Audit: What is it, Process, Importance and MORE

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The Accounting Audit It is a systematic process of review of all the annual accounts of a company or legal person. In other words, the auditor who performs the audit will be in charge of verifying that the accounting reflected in the annual accounts is correct.

Within this context, it is a concept of vital importance in financial matters and very useful in all existing companies in the world. That is why, below we will tell you everything you need to know about this concept, what it consists of, when to do it, types and much more.

What is Accounting Audit?

First of all, we want to tell you in very clear and simple terms, what is known by the term of Accounting Audit. In this regard, you should be aware that the audit It is a process of reviewing the accounts of a company, its accounting image.

First, we are going to define the meaning of audit, which is the process where a company or independent professional (auditor) is hired to collect accounting information. With the exception that this information is valuable to verify that the company being audited has complied with accounting standards.

Additionally, the auditor has to write a report at the end of the audit determining the degree of truthfulness and clarity that the organization owns for accounting purposes. That is, if all the accounting movements of the company are reflected in the accounting books and if everything that appears in the books exists.

Similarly, the aforementioned report is prepared in accordance with the regulatory framework of financial information that corresponds according to the place where the company is located. Within this context, among the reference frameworks are US-GAAP in the United States or IFRS in the European Union.

For his part, the auditor should be a trained person and with enough experience to review and verify the accounting data of the company. In summary, every auditor that performs an Accounting Audit must take into account, as a minimum, the activities detailed below:

  • Check the accounts in order to see if the company has used its resources efficiently and effectively.
  • Review and check the different reports provided by the company on its economic activity and check that it is a true image of it.
  • The audit and therefore the auditor has to be totally Independent. This is essential to legitimize the process and reflect reality.

At what point should the Accounting Audit be performed?

Now then, in this section we want to talk to you about the opportune moment in which the Accounting Audit in your company. In this regard, you should know that there are various reasons that can lead a company to make the decision to audit their accounts.

Therefore, in addition to compliance with the parameters indicated by the Legislation trade, which would lead to the need to audit the accounts compulsorily. All this, in order to comply with current legal regulations that serve as a legal framework for each type of company in particular.

In this sense, the most common audit is the audit obligatory of the annual accounts or accounting closings of a company, that is, by law. In general terms, these audits are carried out within a maximum of 90 days after the closing of the accounting year, with the particularity of each country.

Additionally, they can be voluntary, basically in search of transparency and reliability, or for other reasons established by law. As is the case of listed entities, public offering companies, financial intermediation companies, some insurance branches, for corporate operations, etc.

Likewise, in those public limited companies or limited that are not required to be audited, partners with a stake greater than 5% can request it. In order to achieve maximum transparency and reliability on your investment in the aforementioned companies.

You must bear in mind that the auditor will demand the maximum collaboration of the company and, for a few weeks, will require their attention. In addition, in order to compare it with the accounts, it will request information about the company and its accounting balances from banks, customers and creditors.

Accounting Audit Process

For all the aforementioned, then we are going to explain in an easy and detailed way what the process of Accounting Audit. For which, we tell you that the accounting audit can be divided into three different stages, explained below:

Planning

  • In this first stage, those in charge of the audit process will establish a strategy global for the entire audit process in general.
  • Through which, it is intended that this process be carried out with the greatest possible efficiency possible.
  • This planning will depend on the size and type of entity, the past events related to it and the possible changes that may occur in it.
  • The result of this planning it will be a matrix of potential risks related to the company to which special attention will be paid.

Execution

  • In this second stage, the auditors will perform the audit in accordance with the planning and to the risk matrix prepared in the previous stage.
  • In addition to having all the information contained in the annual accounts, the auditors may at any time require extra information that calls their attention.
  • This information may be related to everybody the movements of the company directly from the personnel of any department.

Issuance of the report

  • This is the last stage where culminates the audit process as such.
  • At this stage, the auditor or group of auditors will express Your opinion based on the review carried out and all the evidence found.
  • All this through the analysis of the annual accounts of the company that were the object of study.

Types of Opinion After the Audit

On the other hand, before concluding this article we are going to describe the type of opinions resulting from a process of Accounting Audit. In this regard, based on the information provided by the company and the audit process carried out, these types of opinion can be given:

Clean or unqualified opinion

  • A clean opinion or without qualifications when the audited annual accounts reflect the true image of the company.
  • Always in accordance with the regulatory framework of reference.
  • Therefore, it is often called a favorable opinion.

Qualified opinion

  • A opinion with exceptions when the auditor finds certain deviations in the preparation of the information of the company’s annual accounts.
  • Always in relation to the normative framework of reference and these, except for that disclaimer, reflect the true image of the company.

Adverse or negative opinion

  • It is found that there are relevant deviations in the preparation of the information contained in the financial statements
  • This happens in relation to the normative frame of reference.
  • This unfavorable opinion is issued when the company’s accounts do not reflect the true image of the accounting.

Abstention or denied opinion

  • This opinion is given when there is a limitation within the scope of the auditor’s work during the review process.
  • Consequently, this no It has allowed him to obtain sufficient evidence to make a judgment on whether the preparation of the annual accounts reflects the real image.
  • As you can see, the quality and availability of the information that you provide to the auditor during the review is essential for the result of the audit.
  • In other words, depending on the information you supply and the explanations given, you will get a result favorable for your company.

Importance of the Accounting Audit

To conclude this article, we are going to talk to you about the importance of the process of Accounting Audit for the company or organization. In this regard, as we previously explained, the purpose of this process is to check that the annual accounts reflect the true image of the same., in addition:

  • It is important for a company to show that the use of its resources is efficient, since there are people who depend on the activity it carries out, such as creditors or its own workers.
  • Second, companies have to deal with all legal and tax regulations, such as paying taxes in a faithful manner.
  • Additionally, the audit involves giving confidence to future creditors that the company may have.

Consequently, we remind you that the audit consists of the review, by an accounting expert, of the accounting of a company. This review is carried out in order to accredit, before third parties, the reasonableness of the veracity and reliability of its content.

Contrary to what many people think, the objective of an audit no is to detect fraud, although in the course of work they can be evidenced. In this sense, its objective is to provide the social agents with information on the correctness of the accounting information that the revised entity is publishing.

Finally, we reiterate that the result of the procedure of Accounting Audit attests that it was prepared in accordance with the corresponding financial information regulatory framework. These frameworks are, for example, US-GAAP in the United States or IFRS in the European Union.

We hope you have a lot of success in your audits!

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