External Audit and Auditors

The external audit involves an independent resource examining a company’s financial statements. The majority of cases require external audits. A business’s condition and operations are evaluated during an external audit. In the context of an annual review or during a special review, a registered accounting firm is responsible for performing this evaluation. It is up to the board of trustees or the annual general meeting (AGM) to choose the auditors.

There should be no personal connection between an independent auditor and a company

Independent auditors should not be personally linked to the business or involved in preparing the accounting records to be audited. Aside from independence, an external auditor should also possess the relevant professional qualifications and the reputation of the auditor, as well as their experience auditing similar businesses. Books of accounts are accessible to auditors for the purpose of gathering information and providing their opinions

The Difference Between External and Internal Audits

There is no conflict between internal and external audits. Contrary to popular belief, they are complementary. An external auditor may use internal auditing work if it deems it appropriate, but it doesn’t reduce the external auditor’s responsibilities. An Internal Audit function ensures that the business is operating efficiently and checks its activities. However, external auditors are completely independent, as they are brought in to complete the audit. The audits ensure that the financial reports are accurate and complete.

Role of External Auditors:

A company’s external auditors are responsible for auditing its general ledger and making any necessary inquiries from the company’s management. The analysis provides a real-time picture of a company’s market position and financial condition, as well as the basis for managerial decisions.

Financial records are audited by external auditors to verify their validity

The purpose of external auditors is to check the validity of financial records to determine if any misstatements have been made in the company’s record as a result of fraud, errors, or misappropriation. As a result, a company’s financial statements are perceived as more credible and authentic.

Entrepreneurs cannot make proper decisions without proper accounting processes

A company’s owner may not be able to make appropriate decisions if there are errors in the accounting process. Due to the procedures used in an audit, errors in the system and other fraudulent activities can be detected and mitigated to a large extent through audits. As part of the audit process, accounting transactions are also recorded according to generally accepted accounting principles. In addition, business owners can take advantage of it by covering themselves when it comes to adhering to various rules and regulations.

The Importance of External Audits:

In an external audit, the main objective is to determine whether the client’s accounting records are complete and accurate, ensure that the records are prepared in accordance with the accounting framework applicable to the client, and ensure that the financial statements reflect the client’s true and fair financial position and results. Management cannot deny access to the company’s financial records, books, or information related to them to a statutory auditor.

In writing, the external auditor should submit his audit report to the parties concerned after conducting the audit and gathering the necessary information. He should state his opinion of whether the financial statements are true and fair.
A company’s financial statements are primarily certified by an external audit. Investors and lenders often require this certification. In addition, all publicly traded companies must have their financial statements audited and obtain this certification before selling their shares.
An external audit ensures that a company’s internal controls, policies, procedures, and guidelines are effective and in compliance with government regulations, industry standards, and company policies. To prevent errors in financial reports, reporting mechanisms are also audited.

SERVICES OF TAXOCRATE IN THE AREA OF AUDIT & ASSURANCE:

Taxocrate (Pvt) Ltd provides audit and assurance services to its clients. Audits provide assurance and advice to management and business process owners on how controls within the organization are working; they ensure that relevant control objectives are being met. The report also identifies areas where control systems may be inadequate, identifies the risks associated with these deficiencies, and offers management advice on how to overcome them. Our services include Company Registration, Firm Registration, Trademark Registration, Income Tax, and Sales Tax Filing.

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