External audit is a routine check of records and/or procedures performed by the certified auditors who are not the part of the company to be audited. It helps both the company and government to check accounting documents. An external audit can be conducted voluntarily or non-voluntarily by the outsider. The external audit is prepared to check the accuracy of statements and an organization’s financial standing.
Benefits of External Auditing:
- Prevents Fraud: You can be a good employer who greatly cares about the employees in your firm, but it will not keep you from having inconsistencies, mistakes, and even fraud. Those things are usually trick to catch. This is why the audit is needed. It is ensured by auditors that those above-mentioned things will be prevented and eradicated.
- Tracks Financial Status: Financial statements that are made by your accountants will be reviewed and assessed by audit firms in Dubai or auditor to check its fairness and accuracy. Even if you have the best accountants in town, they are still bound to make mistakes, and it is essential that everything is checked anyway.
- Assesses System: It is not easy to track what causes errors, inconsistencies, misstatements, and other problems in your financial statements, records, or in your system altogether. Auditors will check your system and assess it to see if there is anything fickle about it.
- Provides Solutions: The solutions that auditors give to a company that they audit do not simply come from loose facts or assumptions. They gather evidence and notes from observations through their examinations that can be the foundation of their opinions and solutions that can be given to business owners.
Need for External Audit in Dubai, UAE
External audit is compulsory for all the companies registered in UAE. The mandatory compliance with International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) has made the external audit report a significant document. The external audit report acts as a definitive financial document at the time of license renewal, getting a loan, etc.
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Responsibilities of External Auditors:
- Providing an opinion on Financial Statements.
- Understanding the Entity and it’s Environment.
- Obtaining Sufficient Evidence to Form an Opinion.
- Independence from Clients.
Role of External Audit:
- To report fraudulent activity in the organization.
- To check any non compliance with legal requirement.
- Express opinion on the set of financial statements.
What Does the Process of Performing an External Audit Include?
An external audit occurs once a year and focuses on the company’s performance and compliance. Accounting records are commonly examined in an external audit to make sure no errors exist in the financial statement, which is important for investors and regulatory requirements. External auditors have no affiliation with the company, which offers the company an unbiased audit.
- Audit Time: An external audit does not have a standard length. The audit goes on until the external auditors have finished. Generally, an external audit begins at the end of the company’s fiscal year, since that is when the accounting books are closed and financial statements for the year are prepared.
- Types of Audits: The external audit process commonly looks at financial statements and accounting records. However, other departments in the company can also be audited during an external audit.
- Pre-Audit Planning: Before the external auditor begins, certain activities must be completed. The auditor must meet with management of the company to determine if any internal changes in control, procedures or other factors have affected company record keeping and reporting.
- Reporting Phase: The reporting phase is the main part of the external audit, which is done on site at the company being audited. In this phase, auditors examine the company’s ability to record and process data accurately in reports, such as in financial statements.
- Auditor Conclusion: At the end of the audit, the external auditors prepare and deliver a summary report to the company. The summary report details all of the findings from the audit.
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