Financial auditing refers to an accounting process applied in business. The process involves using an individual body for evaluating the financial transactions and statements of a business. The ultimate purpose of financial audit is presenting an accurate amount of the business transactions of a company. Besides, it ensures that the accounts presented to the public and shareholders are accurate and justified. The results of financial audit are useful for banks, shareholders, and anybody else with an interest in the company.
BASIC PROCEDURES FOR A FINANCIAL AUDIT:
- Planning: The process of financial audit begins with a plan that involves the method of collecting data to form an opinion about the organization or company’s financial status. A way is planned to collect a sample reflecting a point in time in the life of the company or organization.
- Internal controls: The next step involves giving a look at the internal controls. The auditor demands info, looks closely at the records, and watches financial procedures in action. Without these steps, the auditor cannot give a statement about the financial status of the organization.
- Testing: Testing implies checking whether the internal controls are working or not. An auditor requests more info, returns to the company for more inspections, and watches how financial procedures are being performed.
- Reporting: The final step in financial audit involves giving a conclusion on how the company adheres to accounting standards.
WHY IS FINANCIAL AUDIT MANDATORY FOR SME COMPANIES REGISTERED IN UAE:
Managing finance is one of the most crucial tasks that every business entity needs to go through. A common question that keeps arising in the minds of an entrepreneur is: Is financial audit mandatory? Do the financial reports needs to be submitted to the authority? Well, the reason behind the existence of such a question is based on the mindset that a financial audit is done only by big organizations. Be it a big, small business in Dubai, handling finance is a must. Now, the procedure doesn’t come to an end only by managing it. According to the UAE Commercial Companies Law, and Financial Audit Department, every company should appoint auditors to audit their books.
BENEFITS OF FINANCIAL AUDIT:
- Improved Management Decisions: Audited financial statements can provide an extra layer of confidence, allowing management to make specific changes that can promote positive corporate growth and development with the knowledge that the key numbers they are using are correct.
- Investor Confidence: Providing audited results to investors can increase your odds of receiving crucial investments, helping your business to avoid cash flow issues, and better plan for the future. Audited financials can also result in better investment terms, possibly even larger consideration in exchange for reduced royalties or equity.
- Better Lending Terms: An audit can provide the verifiable records banks and other lenders like to see, increasing your odds of receiving a loan – and better terms and interest rates.
- Employee Confidence: Providing access to audited financial statements can build confidence in your legitimacy as an employer. This demonstrates your commitment to your team members, and could ultimately boost job satisfaction and performance in a way that can yield tangible benefits for your business.
- Customer Loyalty: When you release audited financial records, consumers are far more likely to have confidence in your capabilities, building loyalty and boosting customer retention.
FINANCIAL AUDITOR RESPONSIBILITIES:
- Design the auditing process using common standards of practice, company policies, business goals and industry regulations.
- Indicate areas where risk is found in order to generate a more complete picture of financial responsibility.
- Analyze adherence with budgetary standards and guidelines using financial data and balance sheets.
- Review all financial materials and procedures in order to spot errors, inefficiencies or instances of misuse.
- Confirm a company’s or individual’s profitable holdings, account balances or debt obligations by reviewing databases and other financial sources of information.
- Document all internal processes within an audit; list all data sources; detail all conclusions after an investigation.
- Update the internal organization’s team members with periodic status reports, meetings and other important developments; publish a report after completing an inquiry.
- Work to develop new standards of practice within a company in order to increase accounting accuracy and integrity.
- Provide assistance in the case of an outside firm’s auditing of the organization.
- Reflect on historical and current budgetary trends found in the data.
- Maintain a high level of knowledge and expertise within the field by participating in professional development.
- Keep all sensitive information confidential and secure.
DUTIES OF FINANCIAL AUDITOR:
- Plans financial audits by understanding organization objectives, structure, policies, processes, internal controls, and external regulations; identifying risk areas; preparing audit scope and objectives; preparing audit programs.
- Assesses compliance with financial regulations and controls by executing audit program steps; testing general ledger, account balances, balance sheets, income statements, and related financial statements; examining and analyzing records, reports, operating practices, and documentation.
- Assesses risks and internal controls by identifying areas of non-compliance; evaluating manual and automated financial processes; identifying process weaknesses and inefficiencies and operational issues.
- Verifies assets and liabilities by comparing and analyzing items.
- Completes audit work papers and memoranda by documenting audit tests and findings.
- Communicates audit progress and findings by providing information in status meetings; highlighting unresolved issues; reviewing working papers; preparing final audit reports.
- Improves protection by recommending changes in management monitoring, assessment, and motivational practices, in the internal control structure, and in operating processes; identifying root causes.
- Supports external auditors by coordinating information requirements.
- Provides financial control information by collecting, analyzing, and summarizing data and trends.
- Protects organization’s reputation by keeping information confidential.
- Updates job knowledge by participating in educational opportunities; reading professional publications; maintaining personal networks; participating in professional organizations.
- Contributes to team results by welcoming new and different work requirements; exploring new opportunities to add value to the organization; helping others accomplish related job results as and where needed.
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