External auditing brings transparency, which is fundamental to business. In the market, transparency creates credibility for the company's image. It involves the independent review of a company's financial statements by an external auditor, with the purpose of providing an unbiased opinion as to whether those statements adequately reflect the company's financial position and results of operations. The scopes of external auditing encompass several key areas, including the assessment of internal controls, compliance with applicable accounting principles, the detection of fraud and irregularities, the analysis of risks, and the recommendation of improvements in financial and reporting processes. This introduction will examine some of the main scopes of external auditing, highlighting its importance in promoting the trust of investors, shareholders, and other stakeholders in the accuracy and credibility of an organization's financial information.
Transparency is fundamental in business. In the market, transparency creates credibility for the entity's image, positively influencing the attractiveness of new clients, suppliers, funding institutions, and anyone interested in doing business with the entity. On the other hand, the lack of transparency ends up generating problems of the most varied origins, among others, limiting the entity's ability to generate new business.
To ensure transparency in corporate governance, external auditing plays a fundamental role, since it is able to contribute to the existence of internal controls and to qualify the information used internally within the company, as well as to be passed on to the external public, whether to consumers, media, investors, etc.
External auditing consists of validating a company's data, evaluating financial strength, equity, and other points related to important information for investors, partners, and shareholders. In practice, external auditing is of extreme value for corporate governance, helping the board and management to plan the next strategic steps in the business.
For small and medium-sized businesses, external auditing is equally essential. Due to their nature, these companies may not yet have solidly defined operating flows. In turn, external auditing provides important information for good corporate governance. Knowing this, entrepreneurs can adapt their administrative routine to always rely on this data, knowing how to present them in a clear and objective manner whenever necessary.
If specified in advance, the external auditor may also carry out work within agreed scopes to assist in a process of gradual adjustment of company structures.
The importance of external auditing is not only in the process itself, but also in its validation. Although the main value is intrinsic to the organization of information, marketologically validation also brings short and long-term brand growth, as the company's numbers are shown in a solid way to the market and especially to all potential interested parties.
The business plan The business plan is one of the most important phases of any company. It is precisely in it that the entrepreneur places his projections regarding the market, his product and other important points that will influence the evolution of his company. The correct and adequate preparation of this material can be one of the main differentials between the success or failure of a business. But after all: how can you be sure that your business plan has been developed in the best possible way?
When planning to start a company, it is common that the entrepreneur and his potential partners do not have all the necessary knowledge to build a complete business plan. It is logical that the correct attitude should always be to seek the advice of an expert. The presence of this member not only prevents errors, but also speeds up the flow for creating the business plan.
In this context, the external auditor may assist the entrepreneur, using his technical and impartial knowledge to contribute to the preparation of the business plan. As a professional with high technical capacity, you will be able to evaluate and review scenarios provided for in the document. His vision is invaluable because of his experience in the market, where he is already familiar with recurring obstacles and problems that the entrepreneur must be aware of.
The main support that can be offered by the external auditor is the review of technical accounting and tax aspects raised in the business plan. In this way, it certifies to the partners that the treatments in this area are adequate and that there will be no unforeseen events. The benefit is considerably greater security for carrying out the initial strategy.
Financial control is one of the most important points of a business plan. In it, the entrepreneur and the external auditor will be able to analyze issues such as cash flow, asset allocation, expense control, and others. For the future of the company, it is essential that this part of the document portrays the reality of the business in the most believable way possible.
Equally important, tax planning must also be addressed in the business plan. The presence of an external auditor is even more essential. The tax collection model will directly influence the company's earnings. The choices at this stage will entail different obligations in relation to the Tax Authorities, whether at the federal, state or municipal levels.
Understand how external auditing is fundamental to creating clear, objective, and organized information flows.
Having information exposed in an organized and clear manner is one of the most difficult business challenges to manage today. It's not uncommon to see entrepreneurs and their teams getting lost in flows that don't receive continuity and make the administrative routine more difficult and time-consuming. The result is confused financial statements, erroneous numbers, and worst of all: lack of control over the company's direction.
How can external auditing help? Fortunately, business owners can rely on external auditing to support information and flows. Allowing only internal collaborators to create administrative and financial routines gives rise to minor and more serious errors.
On the other hand, it is possible to count on the support of the external auditor, a professional with high technical and managerial capacity. He will be able to create internal flows for the control and demonstration of data. Through the expertise of the external auditor, the entrepreneur will be able to understand how to organize business information, where it is guaranteed that financial data is being controlled by adequate internal processes.
This is not an expendable thing. Quite the contrary. The external auditor is a guarantee of quality in the generation of information, as well as in the controls through conciliations and compositions. Neglecting the contribution of external auditing can be very harmful to the company. On the other hand, investment is part of the process to create a solid base for the company, leaving no loose ends for the future.
The accounting standards raised by the audit When a company needs to submit information to legal bodies and other parties in the market, it is essential that all the data is adequate to the related accounting standards.
Yes, you need to be aware of this so as not to have unpleasant surprises in the future . And how to solve it? Once again, the external auditor becomes the indispensable support.
When the external auditor creates an organized routine for generating information, he ensures that the technical accounting standards are present in the process. Thus, the comparison of expenses and revenues is prepared as expected by supervisory bodies and investors or partners.
This is even more essential considering that there may be changes in accounting regulations from time to time. Periodically, changes may occur for improvement. A recent example occurred in relation to laws 11,638/07 and 11,941/09, which amended the Public Limited Company Act to bring the national standard closer to the norms practiced internationally.
The external auditor assures the entrepreneur that provision calculations information such as contingencies, provisions for credit or inventory losses, and depreciation and amortization calculations are within the standards established by accounting regulations.
With the help of external auditing, the entrepreneur can call on the auditor whenever there are doubts regarding these processes. Through his experience and technical knowledge, the auditor contributes in an informed and assertive manner to the solution of the problem.
Ideal for collecting and analyzing data from specific points, external auditing of previously agreed procedures follows NBC TSC 4400
Organizing accounting information is essential so that a company or institution can continue to grow or even recover from financial problems. Although there are many types of external auditing services, each of them has its own characteristics. In this article, we will review the benefits of external auditing for previously agreed procedures.
There are times when the entrepreneur or administrator of a business or institution will need external auditing for specific matters. In this way, the independent auditor will inform the contractor and his representatives about the procedures that will be carried out to collect the accounting information.
The origin of this appointment is that the auditor and the entity are in agreement on the procedures that will be carried out during the external audit.
Characteristics of the external audit of previously agreed procedures This type of external audit has some peculiarities that must be taken into account. Using techniques with a high methodological degree, the independent auditor will collect and organize the accounting information of the entity contracting the service. Following all the precepts of NBC TSC 4400, it will produce a report that will be of great organizational value, helping the entrepreneur or administrator to follow the healthiest path for the business.
It should be noted that the external auditor will collect the information and deliver the report to the entity's representatives. As it is a service with previously agreed procedures, it will not provide any assurance, that is, considerations regarding the results of the document. This is true in the context of a positive opinion or a negative form. In this way, the user of the report will draw their own conclusions based on the procedures used and the factual information presented.
It is also characteristic of external auditing with previously agreed procedures that only those who accepted the terms will receive the final report with the findings of the independent auditor.
For this type of audit, the spectrum of activities may encompass techniques such as inquiry and analysis, recalculation, comparison and other accuracy checks, observation, inspection and, finally, obtaining confirmations.
The external auditor and the principles of the activity To carry out the work, the auditor follows the principles of the Accountant's Code of Ethics, ensuring integrity, objectivity, professional competence and zeal, confidentiality, professional behavior, and compliance with all technical standards inherent to the activity.
The Role of External Auditing for Expertise and Investigations In addition to the collection of accounting and financial information, external auditing can also be applied to expertise and investigations
One of the greatest values for companies is credibility. When a company has a good image in the market, acquiring new customers and growing is a matter of planning and good management. On the other hand, when there is a suspicion that something is wrong, the loss is immediate. For this reason, it is essential that entrepreneurs protect themselves against fraud and other irregularities. In this scenario, external and independent auditing is one of the best tools available.
External auditing in fraud prevention One of the greatest advantages of external auditing is the issuance of an impartial certificate on the data submitted by it. In the market, there will be science about the veracity of the information and the reliability of the company. Among the various types of independent auditing, one of its applications is for the prevention of fraud and irregularities. For the entrepreneur or administrator, this is an inestimable value proposition, as it guarantees the company's suitability.
If there is a prior suspicion, this external auditing model can also investigate fraud or irregularities. Finding that something is wrong, the independent auditor can point out the problem using their methodology and accurate technique.
Other scopes of external auditing for expertise and investigations Through independent auditing, it is also possible to verify that the company complies and complies with the Brazilian Anti-Corruption Law 12,846/13, which provides for “the objective administrative and civil liability of legal entities for the commission of acts against the public administration, national or foreign”. There are many details for this legal aspect, so the auditor's experience and knowledge become even more essential.
Another example of application is the possibility of technical assistance in judicial or extrajudicial disputes. Still in this sphere, the auditor can also act as an expert. That way, the parties involved can feel more secure about the data brought to the judiciary.
One of the most useful aspects of this type of external auditing for entrepreneurs is its support for company compliance. After reviewing the company, the independent auditor may create, implement, and monitor business programs and policies. Again, this is another proposal with high added value to the company's administrator, since they can focus on other issues related to their position, allowing the auditor to carry out the necessary procedures.
Get in touch with TATICCA Allinial Global Brazil , which provides integrated auditing, accounting, tax, corporate finance, financial advisory, risk advisory, technology, business consulting and training services. For more information, visit www.taticca.com.br or email taticca@taticca.com.br. Our company has professionals with extensive experience in the market and has certified methodologies for carrying out activities.
