In the world of accounting, accuracy is vital. Incorrect or indecorously reported numbers can lead to all kinds of problems, from misguided strategic planning to cash flow issues, which could leave you unable to pay your employees. And accuracy can be achieved through an audit. A proper examination of everything from specific transaction testing to financial statement report demonstration, an audit performed by a CPA can be the guarantee your company needs to proceed with confidence.
A financial audit, also called as financial statement audit is a thorough report that results from an inspection of a company’s books by a qualified auditor, usually a Certified Public Accountant or a Financial Accountancy firm hiring qualified professionals. The report approves that the financial statements and disclosures presented are fair and honest.
Audit of a financial statement reflects the accuracy of the financial position of a firm. While it is compulsory for public and large scale companies to get their financial statements audited, the same does not apply to smaller or mid-sized companies. Although, SMEs can willingly get their accounts audited for their corporate benefit.
Who Needs Financial Audit?
As it is already known, a financial audit includes verification of the financial reports of a business by an auditor. Audits are needed to be performed by various financial institutions like banks, insurance companies, pension funds, and other companies that meet the following criteria –
- Hire at least 50 people based on an employment contract
- Achieve a net income of at least EUR 5,000,000, or its equivalent in other currencies
- Have a NAV at the end of the financial year that exceeds the equivalent of EUR 2,500,000
5 Critical Benefits of Availing Financial Audit Statements
The auditing of financial declarations offers so many advantages that it can be valuable even if the entity has no legal responsibility to do so. Here are the reasons why you must get your financial statements audited.
- Gives an Overview on Financial Records and Standing – One of the advantages of financial statement audit is the overview that it delivers. The procedure of auditing offers the opportunity to evaluate your financial reports and highlights any problematic areas, which in turn gives you a chance to correct those matters.
- Highlights Areas of Improvement - Once you have uncovered any problem areas, a financial audit allows you to target areas for improvement. It can demonstrates gaps in your financials but also inefficiencies that may need addressing.
- Excellent Risk Assessment – Audit highlights problematic areas and performs an excellent risk management tool. Auditors are an excellent resource for best practices in regards to the segregation of duties and overall organisational structure. Adding a simple process, such as having an employee outside the accounting division take deposits to the bank, can significantly reduce the likelihood of asset misappropriation.
- Improves Internal Control – Audit services help businesses increase their internal control system by emphasising on controls like separation of duties, increased oversight, restricted access to financial systems, third party review of financial statements and much more. Due to this, the efficiency of internal controls drastically improves.
- Prevents Fraud and Misappropriation – Fraud can not only harm the finances of the company but also damage its reputation. An audit helps businesses avoid the chances of fraud and misappropriation in the company. It also builds brand value and the right image of the company in front of its customers, suppliers, stakeholders, etc.
The afore-mentioned benefits are a few of many of conducting a financial audit for businesses. It is advisable to get the review done from expert professionals such as JAXA Chartered Accountants who can help you present the precise picture of your financial statements. Our advisors have years of experience in this field and can make the process hassle-free. Contact us today- we’d be happy to help you.