Financial audits are an important part of financial reporting for businesses and organisations, with the audit process comprising numerous steps.
Financial audits provide confidence in the financial management of companies, charities, and other organisations.
There are a number of reasons why a business or an organisation would seek a financial audit, such as meeting regular requirements, bidding for a government grant, or applying for a loan.
Here is a guide to understanding financial audits and the financial audit process.
What is a financial audit?
A financial audit is an evaluation of the financial statements of a business or organisation, with the intention of forming an opinion on whether the finances are fairly presented.
An independent person will conduct the audit, following the standards established by the Auditing and Assurance Standards Board, which is a federal government body.
There are different types of audits dependent on your goals, such as audits of financial statements or compliance audits.
There are also different ways of completing financial audits and varying metrics to use, depending on the type of business or organisation being audited.
What is involved in the audit process?
The first step is to prepare for an audit, which includes setting a timeline with the auditor and requesting a detailed list of documents and information needed for the audit.
Risk assessment is the next step, where auditors will use their expertise to identify and analyse any risks that may be cause for concern in financial statements.
Auditors often need to rely on their experience and knowledge of the company, industry, and wider environment to make these risk determinations.
When the risks have been assessed, the audit team will develop an audit strategy and plan to address these risks and test various items within the financial statements.
The audit team will gather the evidence they need to carry out the audit, reviewing the organisation’s internal systems, records, and other necessary information.
The team may need to physically inspect the organisation’s assets, including inventory, property, plant, and equipment.
Auditors may also meet with company management and staff throughout the process to assist their evidence gathering.
Once the auditors have gathered all the information they need and carried out their tests, they will use their professional judgement to form an opinion on the organisation’s financial statements.
Get the right help with your audit
After the audit process, there are other actions to consider such as a post-audit debrief and even auditing your auditors.
But the most significant consideration to make when your business has to do an audit is to work with an audit team that you trust.
The experienced team at LDB Group provides special purpose and financial audit and advisory services for public and private companies, not-for-profit entities, self-managed superannuation funds (SMSFs), and more.
To learn more about our financial audit and advisory services, please do not hesitate to call (03) 9875 2900 or send us a message via the contact form below.
