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What is an Auditing

Financial auditing is the process of examining an organizations (or individual’s) financial records to determine if they are accurate and in accordance with any applicable rules (including accepted accounting standards), regulations, and laws.

External auditors come in from outside the organization to examine accounting and financial records and provide an independent opinion on these records. Law requires that all public companies have their financial statements externally audited.

Internal auditors work for the organization as internal employees to examine records and help improve internal processes such as operations, internal controls, risk management, and governance.

 

Benefits of Auditing

We see first-hand how an audit is actually beneficial as it presents you with the opportunity to improve your organisation. Here we aim to highlight just a few major benefits that an audit provides.

  • Compliance

Obviously this is one of the main reasons to conduct an audit: to meet the statutory requirements and regulations in your industry. An audit provides complete peace of mind for business owners and shareholders that the organisation is 100% compliant with all of its current statutory obligations. Non-compliance runs the risk of incurring heavy fines, loss of customers and a tarnished reputation – damage that far outweighs the cost and any minimal, temporary inconvenience that may be caused by an audit.

  • Business Improvements / System Improvements

A thorough, in-depth audit takes an impartial look at your organisation’s internal systems and controls. This means it’s an ideal opportunity for the auditing experts to suggest improvements that can make your business more efficient. Ways to improve internal controls, business systems, accounting practises, efficiencies, governance and culture can all be identified through the audit process.

  • Credibility

An audit provides independent verification that the financial statements are a true and fair representation of the entity’s current situation. This provides invaluable credibility and confidence to your organisation’s customers/clients, stakeholders, investors or lenders and even potential buyers. It is confirmation that financially everything is as it appears to be.

  • Detect and Prevent Fraud

It’s estimated that up to 30% of New Zealand businesses are subject to fraud, error and corruption. Workplace fraud can occur for years without being detected and can be so substantial that some businesses never recover financially or repair their reputations. An audit can be an effective tool for identifying fraud and opportunities to commit fraud. Experienced auditors are skilled at pinpointing weaknesses in an organisation’s systems and controls and suggesting ways to strengthen these to prevent fraud occurring.

  • Better Planning and Budgeting

An audit confirms the accuracy of an organisation’s financial statements by analysing its financial transactions. It’s a detailed process and can result in certain types of income, expenditure, assets and liabilities being scrutinised. This critical examination, coupled with the auditor’s financial expertise, can then be used by business owners for better financial planning, budgeting and financial decision-making for the future.

  • Documents required for Auditing

Before planning for statutory audit, we need to keep ready important document for audit. Here is list of important documents.

Documentation

  1. Audit Engagement Letter
  2. Opening Trail Balance
  3. Last Year Signed Financial Statement
  4. Copy of Computation of Income of Last Year
  5. Shareholding Pattern
  6. List of Directors
  7. List of KMPs
  8. Register 301 Extracts
  9. Minutes of Meeting
  10. Form 26as
  11. Fixed Assets Register
  12. Invoice of Addition to Fixed Assets
  13. Invoice of Sale of Fixed Assets
  14. TDS Payments Challans
  15. PF/PT/ESIC/MLWF (whichever applicable) Payment Challans
  16. Advance Tax Payments Challans
  17. Returns Copy
  18. Loan Payment Sch & Loan Confirmation Letter
  19. Cash Balance Confirmation Letter Along with Denomination
  20. Bank Balance Confirmation
  21. Outstanding Entry Passed: Provide Supporting Xerox Copy
  22. List of Related Party as Per As18
  23. Ledger of Related Party from Tally Having Transaction
  24. Calculation of Foreign Exchange Profit/Loss
  25. Cash Ledger with Transaction More Than Rs. 20000/-
  26. Section 274(1)(G) Of Co. Act: Representation from Director for Qualification
  27. Status of Pending Income Tax Assessment
  28. Draft Financial Statement
  29. Management Representation Letter
  30. Any Change in MOA/AOA
  31. Certificate Under Sec. 40(A)(3) & 269ss & 269t Of Income Tax
  32. Copy of Annual Return Filled with MCA
  33. Calculation of Director Remuneration as Per Companies Act
  34. Section 383a: Secretarial Compliance Certificate
  35. Share Application Pending Refund