Importance of Auditing Financial Accounts for Companies

3 Dec 2019

A financial audit is essential for corporations. Apart from being lawfully liable to an audit, companies conduct it since it guarantees the reliability of the financial statements. It offers great support for the management of a company to have an auditor that issues a value judgment to increase the integrity of your accounts and improve your internal control.

The financial audit or audit of accounts is a process of review of the financial statements of a company. It is carried out by an independent expert and through a certain procedure to issue a value judgment in a report, on the faithful reflection of the company in the annual accounts.

Parker Russell International is a specialized company in auditing and various financial services. For years, they have been excelling in the area of auditing of financial accounts. They provide exceptional services and the expertise of skilled and qualified Chartered Accountants.

Who should undergo this process according to current legislation?

The performance of the external audit is mandatory for all those companies that during two consecutive years, meet at least one of the following requirements:

  • The total assets of the company exceed $2,850,000.
  • The amount of turnover exceeds $5,700,000.
  • The average number of workers during the year is greater than 50 employees.

However, any company can do it voluntarily to know the status of their accounts.

The auditor can issue three types of professional judgments:

  • Favorable: which indicates that in his opinion the accounts represent significantly the true image of the company
  • With exceptions: when the report has this denomination it means that the accounts have significant errors, omissions or limitations, but that they do not imply generalized errors
  • Unfavorable: it means that the errors, omissions, or limitations found generate errors generalized so that they affect all accounts.

Finally, it should be noted that the auditor may deny the opinion, this occurs when there are limitations of scope and / or very significant uncertainties, so the auditor cannot obtain the appropriate audit evidence that leads him to express an opinion.

Who views the audit report?

The information contained in the report written by the auditor is of great relevance for financial institutions, suppliers, investors, shareholders, managers, workers, or any other actor related to a greater or lesser extent with the company.

What benefits does it provide?

The auditor, in addition to giving his opinion on the company’s financial statements, will help clarify the accounting information, which will have greater reliability with third parties. It will also help and advise the company in the proper accounting treatment, so undergoing this process also serves as training for the personnel responsible for carrying out the accounts. In turn, it will make recommendations, if possible, for improvement in the procedures carried out to strengthen the entity’s internal controls.

The auditor is another help for the company, as it will detect errors or omissions and communicate them to the company. In addition, it will also diagnose possible fraud situations. If the errors are of some importance, the auditor will propose adjustments and reclassifications to correct them, and if the company accepts them and makes them their own, it will be presenting correct annual accounts backed by the supervision and acceptance of an auditor.

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