Audit - What does it involve?
The objective of an audit of financial statements is to enable an auditor to express an opinion that the financial statements are prepared in accordance with the relevant financial reporting framework, and that they give true and fair view of the company’s performance during the specified period and of its state of affairs at the end of the that period. The audit has to be carried out by the qualified auditor, who then reports an opinion to the member of the company.
- Seek to understand the company’s business.
- Identify areas of the financial statements that may be materially incorrect
- Check accuracy of some transactions, account balances and disclosures
- Decide if company’s accounting policies are reasonable
- Test that the company’s internal controls are effective
- Assess the validity of directors’ estimates and judgments when they prepared the financial statements
- Evaluate any significant events that have occurred since the financial statements were prepared
- Write to the directors setting out any problems discovered during the audit and advise on how to deal with them
- Write to and issue the auditor’s report to the members of the company