Suitable for evaluating and investigating a company's financial statements, independent auditing is a way to improve corporate governance and provide security to investors. When it comes to gathering and organizing information about a company, few things are as effective as an independent audit. By definition, independent auditing is the process of analyzing and validating the financial and asset information of a business by an exempt and external company. The process consists of hiring a respected and market-based external auditing , who will apply its methodology to analyze and give an opinion on the current situation of its client.
When hiring an independent auditor, the contracting company must bear in mind that the analysis will be transparent and based on the current reality of the business. The independent auditor will build a report expressing his opinion about the numbers in the audited financial statements.
The independent auditor will need access to the company's balance sheet numbers and other information, such as assets and taxes that are being paid. The main advantage of having an independent audit is being able to count on an impartial report with clear guidelines on what should be corrected or improved.
Being able to rely on honest guidelines is of high value for corporate governance, as managers may see errors that they may have been ignoring, already knowing their impact on the competitiveness of the business in the market. The document can guide leadership professionals in coordinating their teams so that everything is followed up and the beneficial results to the company arrive as soon as possible.
Still regarding the advantages of having an independent audit, receiving audit certification is something extremely well regarded in the market by shareholders and investors. This is because there will be highly credible information for the respective conferences. From the shareholder's point of view, the investment will transmit more secure information, making the investment of capital clearer and more reliable.
Analysis of the Financial Statements In addition to reinforcing the veracity of the figures presented, the analysis of the financial statements carried out in the independent audit allows for better planning for the future.
Financial statements are of paramount importance for any organization. It is through them that different parties become aware of the current situation of a company, verifying that the resources invested are being properly well invested in order to bring profit to the business.
Within the financial statements, various information is collected. It is essential that data such as balance sheet, income statement for the forecast period, availability and explanation of figures related to profit or loss, cash flow, statement of assets and explanatory notes with appropriate descriptions of accounting practices are present.
The financial statements must follow the standards set by the market. It is essential that rules and laws are followed correctly for the document to be valid. According to Law 6,404/76, in article 176, for example, it is determined that the statements must indicate the amounts of the previous year for the purpose of comparing the results presented.
Why carry out the analysis of the financial statements? The analysis of the financial statements, which can also be placed as a revision of the financial statements, guarantees a series of benefits to the contracting company and to the document itself. First, the veracity and accuracy of the data presented are certified. By using an independent audit, the numbers are prevented from reaching the final report in a ludicrous manner or simply with errors. The review provides reliable and true numbers.
In this way, the review of the financial statements will also solidify the document; which will become relevant in business decision-making. Knowing that they have real data, company leaders can plan goals and strategies for the near future in a better prepared manner. The fact itself becomes a security for the company and its business model.
Companies of different sizes can count on TATICCA Allinial Global Brazil , which has long and well-known efficacy in areas such as external auditing , consulting, advice and taxes. Our professionals have more than 30 years of experience in the segment, with methodology and certification available. Is independent auditing possible to meet the needs of investors? The financial statements, subject to the procedures of external auditing of an entity, are among the many pieces of information that investors consider when they evaluate where to allocate resources. But press releases, company presentations, additional information in annual reports and non-accounting key performance indicators, and financial metrics are also sources of information available to investors.
Auditors aren't involved like many of these sources of investor information. There is a demand from other capital market participants for auditors to provide more real-time security of information that is outside the financial statements. These new metrics are becoming an increasing percentage of the mix of information that investors are trusting. Therefore, there is potentially an appetite for auditors to get involved in such a way that we can provide assurance that these numbers are being invoked by the markets. Because of the strict rules governing independent auditing procedures, a collaborative process would be necessary to expand auditors' assurance. It is a process that would have to involve regulators, auditors, and investors. Understanding the investors of audited information would be one of the most important parts of the process. Once it is determined, in standards, including professionals registered and certified in national and international bodies, it may need to be changed to allow auditors to carry out new or different procedures. We want to work together to discover which of this information is directly within the competence of external auditing and whether auditors would benefit from carrying out some level of procedures and then telling the investing public what it is that we have done.
Accounting auditing Since accounting auditing is a process that analyzes the financial situation of a company and validates the accuracy of the accounting records, it proves to be advantageous, because in addition to validating the information, it certifies to the administrators that the internal controls are being carried out in an efficient and effective manner. Or, if not, it suggests improvements.
Precisely for this reason, in any company, regardless of size or business area, accounting auditing adds security and transparency to the process. However, it is common for companies to seek it only when they notice evidence of errors or fraud in the financial statements.
It is worth remembering that the accounting audit can be carried out not only in companies that comply with the requirement, but also in small companies, as it identifies fraud and irregularities in management. If not mandatory, the decision to carry out an accounting audit is the responsibility of the company's management.
The accounting auditing process may point out errors, which are unintentional, such as incorrect interpretations of the rules, or it may point out fraud, which are intentional, such as manipulations or falsifications of records. Irregularities identified by the accounting audit can be analyzed by the management level, which will also apply the corrections and improvements. Frauds, on the other hand, are reported directly to the manager, for reasons of secrecy.
The most important thing is to clarify that, even if the accounting audit does not identify errors or fraud, it will always contribute to improvements in company practices.
The main objective of the accounting audit is to compare the financial statements with the financial and financial situation, but this process covers other areas of the company.
In order to highlight the importance of the process, in addition to the main one being to protect errors and fraud in the financial area, we list some of the areas that benefit from accounting auditing:
· In the tax area, the accounting audit guarantees compliance with tax obligations, thus protecting the company from fines and penalties;
· In the asset area, accounting auditing helps to control the company's assets;
· In the administrative area, accounting auditing reduces negligence and inefficiency of processes;
· In the social area, the accounting audit suggests the correct application of resources, increasing the credibility of investments.
These are just some of the benefits brought by accounting auditing, which is restricted to the auditor and in compliance with Brazilian and international standards, due to independence issues.
An accounting audit is the examination of the financial statements (also known as financial statements) of an organization - as presented in the annual report - by someone independent of that organization. The financial statements include a balance sheet, an income statement, a statement of changes in equity, a cash flow statement, and explanatory notes that comprise a summary of significant accounting policies and other explanatory notes.
The purpose of an accounting audit is to form a view as to whether the information presented in the financial statements, taken as a whole, reflects the financial position of the organization on a given date.
When examining financial statements, the accounting audit must follow auditing standards established by a governing body. Once the auditors have completed their work, they write an audit report, explaining what they did and giving an opinion drawn from their work. Generally, all publicly traded companies and limited liability companies are subject to an audit each year. Other organizations may require or request an accounting audit depending on their structure and ownership.
In an accounting audit, auditors do not perform auditing procedures on:
Audit other information provided to members of the organization, for example, the directors' report. Verify each item in the financial statements — audits are based on selective tests only. Judge the appropriateness of the organization's business activities or strategies or decisions taken by directors. Observe all transactions carried out by the organization. Test the appropriateness of all internal controls in the organization. Comment to shareholders about the quality of directors and managers, the quality of corporate governance, or the quality of the organization's risk management procedures and controls. Also in an accounting audit, auditors cannot be responsible for:
Predict the future — The accounting audit refers to a specific previous accounting period. It does not judge what may happen in the future and therefore cannot guarantee that the organization will continue in business indefinitely. Be there all the time — The accounting audit is performed over a defined period of time, and the auditors are not in the organization all the time. The main purpose of the accounting audit is to form an opinion on the information in the financial statements, as a whole, and not to identify all possible irregularities. This means that while auditors are aware of the signs of potential material fraud, it is not possible to be certain that the frauds will be identified. The organization's management prepares the financial statements, in accordance with legal requirements and financial reporting standards. The organization's directors approve the financial statements.
The accounting audit begins its examination, understanding the organization's activities and considering the economic and industrial problems that may affect the business during the reporting period. For each major activity listed in the financial statements, auditors identify and assess any risks that could have a significant impact on the financial position or financial performance and some of the measures (called internal controls) that the organization has implemented to mitigate those risks.
Based on the risks and controls identified, the accounting audit considers what management has done to ensure that the financial statements are accurate and examines supporting evidence. The auditors then make a judgment as to whether the financial statements presented as a whole present a true and fair view of the financial results and position of the organization and its cash flows, and whether it complies with financial reporting standards. Finally, the auditors prepare an audit report that presents their opinion, to the shareholders or members of the organization.
Auditors discuss the scope of the auditing work with the organization—directors or management may request that additional procedures be carried out. Auditors maintain the independence of management and directors so that tests and judgments are made objectively. The accounting audit determines the type and extent of the auditing procedures to be carried out, depending on the risks and controls that they have identified. Procedures may include:
ask questions—from written questions to informal oral questions—from a range of individuals in the organization. examine financial and accounting records, other documents, and tangible items, such as facilities and equipment. make judgments on significant estimates or assumptions that management made when preparing the financial statements. obtain written confirmations of certain issues, for example, asking the debtor to confirm the amount of the debt with the organization. test the organization's internal controls. test processes or procedures being carried out. Are you looking for an auditing firm? TATICCA can help your business through different services, always counting on an experienced and specialized team. Learn about the service options available. For more details, see our external audit page .
Auditing of the accounting/financial statements Review of accounting/financial statements Review of intermediate information Previously agreed procedures Assurance Work Other Than Auditing and Review Assurance Report Related to Sustainability and Social Responsibility Assessment Reports Accounting and financial due diligence Advice and Consultancy in IFRS, CPC, IPSAS and USGAAP Advice on the Preparation of Financial Statements Accounting and Financial Consulting Services Analysis of accounting policies and internal control systems Services for entities from regulated sectors Foundations, Associations, NGOs Business Combinations, Division, Merger, and Incorporation Accounting Reports, Expertise and Investigations Corporate Transactions Internal Audit Important details before hiring an auditing firm
Before hiring an auditing firm, business owners, managers, and directors must be aware of details that cannot be ignored. It is essential that the auditing firm provide the certificate that proves the completion of the process. The document will serve as proof for investors and partners.
It is also essential to have a team recognized for its competence and market reference. In this way, the effectiveness of the processes is guaranteed. The audit must be able to produce reports with clear data that are easy to understand.
Another factor is to buy with an auditing firm that provides recommendations and guidance to contractors. The independent audit must point out sustainable directions for the client, showing where they can optimize accounting and financial processes.
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.
