An auditor is an individual who cross-checks the data of business transactions of a company which is prepared in the first instance by the accountant of the company. The auditor then prepares a report which lays down the level of precision of the financial statements presented to him. If the auditor’s findings match the financial statements submitted to him, then all transactions are legitimate.
An auditor also calculates the taxes due, inspects accounting systems for efficiency and makes recommendations about prevailing practices in accountancy so as to reduce cost and enhance profits.
The reason behind getting financial statements audited is to make sure that they are free from errors, both deliberate or accidental as well as to ensure that taxes due are paid on time. Businesses are required to get their financial records regularly audited as per the prevailing law in the jurisdiction of incorporation.
Auditors are of two types, and they are external auditors and internal auditors. Internal auditors are auditors that are employed by an organization to perform an audit of the business transactions. External Auditors, on the other hand, are independent entities that are hired by organizations that are subject to an audit.
What Is RAKEZ?
Ras Al Khaimah Economic Zone (RAKEZ) is a business hub in Ras Al Khaimah. The government established RAKEZ to encourage investors, startups and multinational corporations to set up their businesses within this zone. The authority provides the business with licences and supports them to set up their enterprise and lays down standards for operation.
RAKEZ approved auditors are reliable and distinguished auditors in the region and have got the authorization from the concerned department to practice in the area.
How Auditors help companies?
Auditors help companies in the following ways:
1. Prepare an Audit Report
An audit report, in simple terms, is an appraisal of a business’s financial position. The auditor is responsible for preparing an audit report based on the financial statements of the company. The book of accounts so examined by him should be maintained in accordance with the relevant laws. The auditor has to ensure that the entity’s financial statements depict a correct picture about the company’s financial position.
2. Form a contrary opinion, where necessary
The auditor’s report has a high degree of assurance and reliability because it contains the auditor’s opinion on the financial statements. Where the auditor feels that the accounts do not depict an accurate and fair view of the financial position of the business, he is also entitled to form an adverse opinion on the same. Additionally, where he is dissatisfied with the information provided and finds that he cannot express a proper opinion on the statements, he will issue a disclaimer of opinion. A disclaimer of opinion basically indicates that due to the lack of information available, the financial status of the entity cannot be determined. However, the report must specify the reasons for such negative opinion.
3. Make inquiries
One of the auditor’s principal duties is to make inquiries, as and when he finds it necessary. A few of the inquiries include:-
1. To ensure that the loans and advances made on the basis of security are adequately secured and the terms relating to the same are fair.
2. Whether any personal expenses (expenses not associated with the business) are charged to the Revenue Account.
3. Where loans and advances are made but they are shown as deposits.
4. Whether the financial statements comply with the relevant accounting standards
4. Comply with Auditing Standards
These standards are laid down by the appropriate authority in a state, and they aid the auditor in performing his audit duties with relative ease and accuracy.
5. Reporting of fraud
Generally, in the course of performing his duties, the auditor may have certain suspicions concerning fraud that’s taking place within the company, certain situations where the financial statements and the figures contained therein don’t quite add up. When he finds himself to be in such circumstances, he will have to report the matter to the concerned authority.
6. Conform to the Code of Ethics and Code of Professional Conduct
The auditor, being a professional, must adhere to the Code of Ethics and the Code of Professional Conduct. Part of this involves confidentiality and due care in the performance of his duties. Another essential requisite is professional scepticism. In simple words, the auditor must have a questioning mind, must be alert to possible mishaps, errors and frauds in the financial statements.
7. Assistance in an investigation
In the case where the company is under the scope of an investigation, the auditor must assist the officers as required for the same.
Hence, it can be seen that the duties of the auditor are pretty diverse; it has an all-round and far-reaching impact. The level of assurance provided by a set of audited financial statements is comparatively far higher when compared to regular unaudited financial statements.
The above-mentioned details make it very clear that auditing is a crucial task when it comes to efficiently managing an organization and hence, selecting an auditor with utmost knowledge in the field and good track record is paramount.
JAXA is an ISO 9001-2015 firm of experienced chartered accountants, auditors and specialist service teams offering a wide range of services including Auditing, Accounting, Feasibility studies and Management and Software Consultancy services tailored to a client’s needs. We are RAKEZ approved auditors. Contact us for more details.