At the end of each year, companies provide information about their financial performance by issuing financial statements: the income statement, the balance sheet statement, and the cash flow statement. For several parties interested in this information, such as investors, banks, employees, and regulatory bodies, and to ensure the accuracy and correctness of this financial information, companies audit their financial statements through a qualified auditor, which leads to enhancing the confidence of investors, banks, and regulatory bodies in these financial statements.

What is a financial audit?

The financial audit refers to the process of evaluating and examining the financial statements of the company with the aim of ensuring that the financial statements included in the financial statements are correct, accurate, and fair. The audit also reflects the financial operations that the company claims to have carried out. through an external auditor through a certified public accounting (CPA) company.

What are the types of financial audit?

There are three main types of financial auditing, and these types are:

Internal audit

The internal audit is conducted by an internal auditor who is considered an employee of the company, and the internal audit refers to the process of evaluating the internal controls of the company and also includes the evaluation of accounting operations and corporate governance, as this type of audit ensures that the company adheres to laws and regulations and helps to maintain Providing accurate and timely financial reports every year is important, and the internal audit process is important in maintaining the operational efficiency of the company by discovering and correcting problems before they are discovered by the external auditor.

External audit

The external audit is conducted by an accountant independent of the company. The main objective of the external audit is to ensure the accuracy and validity of the financial reports and to issue an accredited certificate that the financial statements included in the company’s financial statements are correct and accurate.

Internal Revenue Service Audit

This type of audit refers to the process of reviewing, examining, and auditing each of the accounts of companies or individuals and financial information, with the aim of ensuring that the company has reported the financial statements correctly and accurately in accordance with the tax law and to ascertain the value of the reported tax amount.

What are the stages of the financial audit process?

There are four main stages in the financial audit process, namely:

Planning stage

Planning is the first step in the audit process, as in this step all the necessary resources will be used to achieve the objectives and ensure their effectiveness. At this stage, appropriate methods and alternatives for carrying out audit activities will be identified and selected, and these methods must be chosen by a work team with experience and creativity.

The internal control stage

At this stage, the auditor looks at the financial statements and examines them by collecting information and invoices about the old commercial transactions carried out by the company to ensure that the documented financial statements resulted from real financial transactions and to verify their financial value.

Testing phase

This stage is an extension of the previous stage, as the auditor checks whether the internal controls are working or not, and therefore the auditor may request additional information about the company’s business transactions, follow up on the examination, and see the implementation of the internal controls directly.

Stage of report submission

The auditor gives a report on the company based on the accuracy of its financial statements. There are four types of financial audit reports, namely:

Unqualified approval: It means that the auditor did not find any errors in the company’s data and that this report is the best evaluation the company can get.
Qualified approval: The auditor issues this report if he or she finds that the company has not complied with generally accepted accounting principles.
Disclaimer of opinion: In this case, the auditor avoids expressing any opinion about the company’s performance due to the lack of sufficient data to complete the audit process.
Negative result: In this case, the financial information contained in the financial reports is significantly and substantially distorted, and there is fraud and manipulation in the financial statements.

What are the characteristics of a financial audit?

There are several characteristics of financial auditing, including:

Financial auditing is an important and essential part of the company, as the success or failure of the company depends on the results of the auditing process.
Financial auditing is an important means of discovering errors that are difficult to identify and discover internally, but through the process of financial auditing, they can be easily detected and identified.
The financial audit guarantees the obligation to provide financial information based on the standards set and commensurate with the economic and accounting realities of the company.

What are the objectives of the financial audit?

There are several objectives of the financial audit, and among these objectives:

Ensure that the financial information contained in the financial reports is free from material errors.
Expressing the auditor’s opinion as to whether the information contained in the financial reports has been prepared in accordance with the financial reporting framework.
Submitting a report on the financial statements, as the report is prepared in accordance with international auditing standards and based on the auditor’s findings.

What is a financial audit?