An external audit is somewhat similar to an internal audit with some differences. Here we have provided a detailed explanation of how External Audit services can help your business.
- What is External Audit?
- What are the advantages of External Audit?
- Why is external Audit required by Businesses?
- What is the external Audit process?
- What is the Difference between External Audit and Internal Audit?
- Conducting External Audit for the first time?
These are some of the questions which frequently pop into the minds of the management. The increasing viability and the ability of people to move freely around the world and set up businesses in different parts of the world plays a major role in the growth and development of such services as Accounting and Audit.
What is External Audit?
An external audit can be understood as a process in which all the financial books of a company are examined by an external entity. This type of Audit is usually conducted by court order and is conducted by a third party that has no relation to the company being audited. Similar to an Internal Audit, an External Audit will also provide detailed information about the company, which will be helpful to both the management as well as the investors and shareholders. This type of audit will focus more on how the investors and shareholders of the company will benefit from the business and how the management can prepare a plan for the future of the business.
An external audit is considered more impartial and without bias, as the Audit is conducted by a third party (external member). The management has to appoint a separate auditor or auditing team to conduct the External Audit of the company. Because of these reasons conducting an External Audit of a company is very important.
What are the Advantages of External Audit?
Apart from being unbiased, there are many advantages of conducting an external audit for a business. Some of the benefits of External Audit are mentioned below:
- An External Audit provides a Complete and Comprehensive business report.
- It ensures that all the compliance requirements of the jurisdiction are followed.
- As the External Audit is conducted by a third party, it will also provide a different perspective of how to manage the business.
- The Audit will assist the management in the judicious and proper utilization of resources, thus curbing wastage.
- It will increase the confidence of the investors and will bring in more investors.
- The External Audit will help understand the workings of the business and will prepare it for the future.
To understand more about the advantages of External Audit and how can it benefit your business, please refer to our blog "6 Advantages of External Audit in 2021."
Why is External Audit required by Businesses?
There are many different reasons because of which a company requires External Audit. Some of the benefits of External Audit to a business is as follows:
- An External Audit provides an outlook about the business from an external point of view which can help the management to understand the business as well as the business environment.
- It provides a benchmark to the businesses and also assists the management in planning for the future. After comparing the past performance the management will be in a position to take better decisions.
- There are many compliance requirements that need to be fulfilled by a business, and an external audit helps in ensuring compliance according to the jurisdiction mentioned.
- An external Audit helps in increasing the credibility of the business and also helps in attracting more and more investors which in turn increases the financial capability of the business.
There are many more benefits of availing of an External Audit for a business. To know more, you can refer to the blog titled "Why do companies require External Audit."
What is the external audit process?
An external Audit process comprises of the following stages:
What is the Difference between External Audit and Internal Audit?
There are two different types of Audits available to a business, namely Internal Audit and External Audit. These audits provide similar end results but are different from each other. The differences between Internal and External Auditing are as follows:
- An External Audit is usually performed by an individual or a team of individual who is not related to the organization, whereas the internal Audit is conducted by an individual or team of people who are under the payroll of the organization.
- An External Audit is usually performed to examine if the information revealed by the management is correct and can be trusted, whereas an internal audit is conducted by the management to understand the business activities and if anything can be made better.
- An external audit can be conducted after a business quarter or a financial year is over. An External Audit can also be conducted when there is a huge change in the organization, either financial or structural. An internal audit can be conducted as per the need and requirement of the business as it is conducted by a specific department of the organization.
There are many more differences between the two kinds of Audit, but these both are conducted to enhance profitability and maintain the business's compliance. The management of the business should make a decision on which kind of Audit will be suitable for your business.
Things to take care of when conducting an External Audit for the first time.
Before embarking on a journey to conduct an External Audit for your company, there are some points which should be kept in mind of the management. Some of the important points to keep in mind are:
- First and foremost, the management should understand the basics of how an External Audit works and what are the results that can be obtained by it.
- After understanding how the external Audit works, the management should obtain all the documents which will be required in the process in order to provide better results.
- In certain scenarios, it is not possible for the management to conduct an internal audit themselves. In such circumstances, the management needs to hire an expert who will understand the requirements of the business and will provide a solution accordingly.
There are many more points that need to be kept in mind before availing of External Audit Services from a reputed source. To know more about what are the points to be kept in mind, please refer to our blog titled "5 Tips to Consider While Conducting an External Audit"
This is why it is suggested that the management should take the assistance of a reputed firm which will take care of all the auditing requirements of the company.
JAXA External Audit Services in Dubai, UAE
- Analysis of business performance against predetermined management objectives
- Examining the accounting records and checking other evidence supporting financial statements
- Assessment of business risks and providing the relative suggestions
JAXA is a financial consultant in Dubai offering a wide range of business services, including accounting, auditing, software consultancy, and management. We have been providing the best audit services in Dubai and other areas as well. At JAXA, we follow a precise and proven approach to ensure that every item requiring investigation and verification of financial records is properly substantiated.
For external audit services in Dubai, contact us – we'd be glad to assist!
What is the difference between internal and external audit?
Internal audit is performed by the auditors who are appointed by the company while external audit is performed by the third-party auditors appointed by shareholders.
Why do we need an external audit report in Dubai?
An external audit report is very useful in free zones and it is also required during the loan sanction by banks in the UAE.
What is IFRS?
IFRS stands for International Financial Reporting Standards. It is an international accounting framework followed by 120 countries in logging accounting information.