- A financial audit is an independent, objective evaluation of an organization’s financial reports and financial reporting processes. The primary purpose for financial audits is to give regulators, investors, directors, and manager’s reasonable assurance that financial statements are accurate and complete.
- Financial audits provide reasonable assurance, but not absolute guarantees. Through a variety of different audit procedures such as interviews, observation, and test work, financial auditors can determine if controls and processes needed to produce accurate financial statements are in place. If the controls and processes are in place, then they can conclude that the financial statements are accurate and reasonable, but they still can’t guarantee that there were no human errors or miscommunications that may lead to a mistake.
- Financial statements are supposed to depict the “True and Fair” position of the business and a financial auditis conducted to provide an opinion whether “financial statements” (the information being verified) are stated in accordance with specified criteria. Normally, the criteria are international accounting standards, although auditors may conduct audits of financial statements prepared using the cash basis or some other basis of accounting appropriate for the organisation. In providing an opinion whether financial statements are fairly stated in accordance with accounting standards, the auditor gathers evidence to determine whether the statements contain material errors or other misstatements.
- BMS is equipped with the sound professionals to do the audit procedures adequately to provide you with the best possible service.
- Along with the assurance that financial statements depicts a true and fair view Financial audits exist to add credibility to the implied assertion by an organisation’s management that its financial statements fairly represent the organisation’s position and performance to the firm’s stakeholders. The principal stakeholders of a company are typically its shareholders, but other parties such as tax authorities, banks, regulators, suppliers, customers and employees may also have an interest in knowing that the financial statements are presented fairly, in all material aspects. It is always necessary to do the audit procedures to arrive at the true and fair view of the Financial Statements. BMS is a group of Chartered Accountants to give your financial statements a true and fair view
- An audit is designed to reduce the risk of a material financial statement misstatement whether caused by fraud or error.
- Audits exist because they add value through easing the cost of information asymmetry and reducing information risk
- . Our commitment to delivering high-quality assurance services is at the heart of what we do. And because we understand that, to achieve your potential, you need a tailored service as much as a consistent methodology, we work to give you the benefit of our deep sector knowledge, our full subject matter knowledge and the latest insights from our work worldwide.
Changes in Audit procedures..
- After the Most talked and familiar scandals of Enron and Arthur Andersen the then one of the five largest accountancy firms worldwide, where the company succeeded in hiding some important facts, such as off-book liabilities, from banks and shareholders, which Eventually led Enron file for bankruptcy, and (as of 2006) is in the process of being dissolved and Arthur Andersen, lost their ability to audit public companies, essentially killing off the firm, financial auditing standards and methods have tended to change significantly only after auditing failures.
A recent trend in audits (spurred on by such accounting scandals as Enron and WorldCom) has been an increased focus on internal control procedures, which aim to ensure the completeness, accuracy and validity of items in the accounts, and restricted access to financial systems. This emphasis on the internal control environment is now a mandatory part of the audit of majority companies.
Stages of Audit :
Phase I Plan and Design an Audit Approach :
Where the auditors gain an idea of the organization and prepares an audit plan to work out how the audit will be done?
What the auditors understand?
- The relevant industry, regulatory, and other external factors including the applicable financial reporting framework
- The nature of the entity
- The entity’s selection and application of accounting policies
- The entity’s objectives and strategies, and the related business risks that may result in material misstatement of the financial statements
- The measurement and review of the entity’s financial performance
- Internal control relevant to the audit
Phase II Perform Test of Controls and Substantive Test of Transactions:
Here the auditor verifies the internal control of the organization and based on that decides whether the organization needs a comprehensive audit or substantive audit.
- Test of Control: if the auditor plans to reduce the determined control risk, then the auditor should perform the test of control, to assess the operating effectiveness of internal controls (e.g. authorisation of transactions, account reconciliations, segregation of duties) including IT General Controls. If internal controls are assessed as effective, this will reduce (but not entirely eliminate) the amount of ‘substantive’ work the auditor needs to do (see below).
- Substantive test of transactions: evaluate the client’s recording of transactions by verifying the monetary amounts of transactions, a process called substantive tests of transactions. For example, the auditor might use computer software to compare the unit selling price on duplicate sales invoices with an electronic file of approved prices as a test of the accuracy objective for sales transactions. Like the test of control in the preceding paragraph, this test satisfies the accuracy transaction-related audit objective for sales. For the sake of efficiency, auditors often perform tests of controls and substantive tests of transactions at the same time.
- Assess Likelihood of Misstatement in Financial Statement.
Phase III Perform Analytical Procedures and Tests of Details of Balances
- where internal controls are strong, auditors typically rely more on Substantive Analytical Procedures (the comparison of sets of financial information, and financial with non-financial information, to see if the numbers ‘make sense’ and that unexpected movements can be explained)
- where internal controls are weak, auditors typically rely more on Substantive Tests of Detail of Balance (selecting a sample of items from the major account balances, and finding hard evidence (e.g. invoices, bank statements) for those items)
Phase IV Complete the Audit and Issue an Audit Report
After performing various tests, the auditor finally completes the audit and finally issues an audit report.
An Auditor Performs the various functions of Audit with due diligence and has his own set of responsibilities like:
- Gives a true and fair view about whether the financial report complies with the accounting standards
- Conduct their audit in accordance with auditing standards
- Give the directors and auditor’s independence declaration and meet independence requirements
- Report certain suspected contraventions
- At BMS we have a team of qualified Chartered Accountants who are well versed and expert in the Financial Statement Audits and will give the organisation an exact and true picture of the Financials.
- We adapt our audit services to fit your unique needs, but what doesn’t change is the exceptional service quality we deliver to all our clients. Whether you’re already at the top or you’re on your way up.
At BMS Auditing, our Financial Statements audit lends credibility to our clients’ financial statements, as our auditors offer more to an assignment than merely ticking boxes. Through our global network, they have access to the knowledge of industry developments and international trends, which provides them with intrinsic awareness of the global marketplace and required local standards.
- BMS is always at your service to conduct a timely and effective audit for you..!!!