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Independent Financial Audit: Process & Procedures

Independent Financial Audit: Process & Procedures

An independent financial audit, otherwise referred to as an “audit”, is the work conducted by a public accountant who holds the certifications and licenses to perform the job. The word “independent” highlights the fact that the person conducting the audit is not part of the organization and is not affiliated with any company activity.

The Importance of a Financial Audit

Unless you take it upon yourself as a business owner to hire someone who can perform an independent financial audit, you may not get the assurance you require, nor will you be alerted of any misstatements or errors. In some instances, required annually by law, various clubs, companies and even charities must publish audited accounts to ensure its day-to-day running. The people that the audit will be most interesting to are the shareholders and investors of a business, because it is their financial situation that could potentially be affected by discrepancies on financial records. Sometimes an independent financial audit can determine the value of an organization and its shares but also, audits will look closely at internal control systems to ensure all transactions are completed according to policies and rules.

The Process of an Independent Financial Audit

A person or a team of financial professionals will carry out an audit in an unbiased way. Their approach will be competent and they will possess a particular license to show that they are legally capable of meeting international standards. A certified accounting firm can be hired by the organization that requires annual auditing and a set list of rules and regulations must be followed when the audit covers the following areas:

  • Planning and risk assessment
  • Internal controls testing
  • Substantive procedures
  • Independent analytical procedures
  • Tests of detail
  • Finalization

The above steps of an audit process  can involve finding hard, clear evidence, such as bank statements and invoices, before a final report is completed.

Goals and Objectives

The person(s) completing an independent financial audit will have clear goals and objectives. Corporate financial reports may be compared with the financial assessment before results are released. Should you have specialized goals that you would like the auditor to achieve, like risk management, tax matters or assurance services, it is possible to track down a professional who is capable. Some other auditing goals include painting a clear picture of company flaws and presenting findings in an oral or written report.

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