Financial Audit
A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent. The audit can be conducted internally by employees of the organization or externally by an outside CA firm.
The process is intended to assure your stakeholders that management has provided a “true and fair” view of the business’s financial position. This confirms that your company’s financial processes are all above board – minimizing the risk of fraud – and that your accounting documents aren’t covering up for any financial mismanagement. However, it’s also important to note that financial statement audits can bring value to your business by identifying controls or processes that could be improved, thereby enhancing the quality of your business.
Important Financial Statements That Need To Be Audited
An income statement shows the performance of the company during a fiscal year. The statement reports the revenue earned and expenses incurred during the period. On the last line, the report reveals the net profit or loss for the period.
The balance sheet reports the financial position of the company at the end of the fiscal year (or at any other point in time a balance sheet is prepared. It reveals the value of assets, liabilities, and equity of a company.
The cash flow statement may also be included in the audited financial statements. The cash flow statement reveals the cash inflows and outflows during the fiscal year. It provides an insight into the company’s ability to meet its short-term obligations and continue operating in the foreseeable future. The auditor may verify the entries in the cash flow statement against the bank statement and also check the accuracy of the footnotes.