External Audit Services
An external audit is a financial review that is conducted by a party not associated with the company or department that is voluntarily or involuntarily under audit. An external audit takes place within a defined set of rules or laws. In simple terms, an external audit will seek to determine the condition of a business and its operations across a specific period. It will be carried out by a registered firm of accountants, and can take place as part of a standard annual review or during a special review. Auditors will be appointed at an annual general meeting (AGM) or by the board of trustees. The independence of the auditors is vitally important, and means that they must in no way be personally connected to your business, and cannot have played any role in preparing the accounting records being audited.
Importance of External Audit
The main purpose for which the external audit is conducted includes the determination of the completeness and accuracy of the accounting records of the client, to ensure that the records of the clients are prepared as per the accounting framework which applies to them and to ensure that the financial statements of the client present the true and fair results and the financial position. A statutory auditor can ask for the company’s financial books, records, or information in relation to that for which the management cannot deny him.
After conducting the audit and gathering necessary information, the external auditor is supposed to give its audit report in writing, which will be based on the various evidence and data collected on the true and fair view of the financial statements provided to him to the concerned parties.
Most commonly, an external audit is intended to get the certification of financial statements of the company. Certain investors and the lenders require this certification for their analysis. Also, all publicly traded businesses or the corporations which sell their shares to the public are legally required to get their financial statements audited and get this certification.
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