5 Things You Most Likely Didn’t Know About Auditing
- April 18, 2019
- Posted by: admin
- Category: Finance & Accounting
While everyone uses the term “auditing” freely almost every other day, do we really know what it is and what it entails? Here are five things that you most likely didn’t know about auditing:
What is auditing?
Auditing is an exhaustive investigation of the financial statements of a company and is used to certify that the business’s accounting reports are accurate and up to date.
What is the difference between accounting and auditing?
Accounting is the continuous collection and recording of a firm’s financial data and the organization of the same by following different accounting rules to create financial statements.
Accounting is succeeded by auditing which is an examination of the end products of accounting.
Therefore where accounting is an ongoing process, auditing is a periodic event. In fact, an audit serves as an eye-opener for business owners as it highlights the strengths and weaknesses of their business.
Auditing your financial statements is required by law
It has been decreed by the UAE government that companies must conduct a yearly audit of all financial statements. However, there are some exceptions. For instance, companies located in free zones are not mandated to conduct audits by the government. But they conduct external audits anyway with the help of auditors in the free zone.
What does the auditing process entail?
The company will have an agreement with a third-party auditing company in Dubai to conduct its financial audit. The first step will be to prepare the documents for auditing. The auditing company will provide the business with a checklist of documents required. They will usually ask for the previous audit report, financial statements, ledgers, bank statements, receipts, business license etc.
The second step is the actual audit. A date will be set for the audit to take place. The auditing firm interviews all employees related to the departments being audited followed by a thorough check of the business’ compliance with the jurisdiction and country policies. All internal controls, financial statements and accounting software applications are investigated.
Once the auditing process is completed the third-party auditing firm prepares a detailed report with their findings and discusses the same with the business owners in a face-to-meeting.
Why is auditing important for your business?
Audit analyses the financial statements of a business to form an opinion regarding the financial health of the company. This reduces the chances of fraud and also controls the misappropriation of assets by the business.
This is the primary reason why the government has made a yearly audit mandatory. However, even firms for whom the government does not mandate an audit prefer to still audit their books of accounts at least once a year to gain financial clarity.
Owing to the numerous businesses running in our thriving metropolis, there are a plethora of auditing firms in Dubai to cater to the requirement. A&M Alansari Accounting & Consultancy is a well-known auditing company in Dubai. To know more about our services, feel free to contact our auditors in Dubai.