As many of you will know, an audit consists of the review of some specific aspect of a company. Before delving into the accounting audit. In this case we can distinguish between several ways of classifying the audit:
- On the one hand, in relation to the person who is in charge of making it, we can differentiate between:
- Internal audit
- External audit
- On the other hand, depending on who you audit, we can differentiate between:
- Operational
- Environmental
- Financial
- Accountant
In this sense, the best-known audit at a global level is the accounting audit of the annual accounts. This review is carried out by a certified person for this purpose and consists of verifying that the accounting documentation complies with the provisions of the accounting regulations. Once it is reviewed, a report will be issued on the different aspects observed.
Objectives of the Accounting Audit
The main objective of preparing a report, with the auditor’s opinion on the accounting information present in it, is very useful for anyone related to the audited organization. Some of the individuals who are interested in this information are:
- Suppliers: those who are interested in knowing information about the liquidity of the organization, since they depend on the collection of their products or services.
- Banking entities: which may be interested in knowing the solvency situation of the organization.
- Shareholders: Those individual shareholders or potential shareholders who have an interest in knowing the dividends that can be obtained from their investment will have an interest.
Although this information can be extracted directly from the financial statements of the organization, the fact that these are audited, guarantee us greater reliability before those people in knowing the situation of the organization.
Mandatory in the Audit of Accounts
As established by Law 22/2015, of July 20, on Auditing of Accounts. Entities, regardless of their legal nature, will be required to audit, as established by law in article 1.2.
How is an Audit carried out?
The accounting audit is carried out by professionals, trained and authorized, where they verify the financial statements of the organizations:
- Balance sheet.
- Profit and loss account.
- Cash flow statement.
- Statement of Changes in Equity.
- Memory.
These reviews must be made in accordance with the technical standards for auditing accounts (ICAC), which are intended to ensure that the accounting information provided by the entity reflects the true image of the assets and financial situation of the company. The final objective is to present a report highlighting the opinion of the auditor on what was audited.
In this way, for the auditors to be able to carry out their work, companies must receive the accounting documentation, on which they will carry out a timely analysis. In general, they visit the entity to be able to consult the different reports.
Within the tasks performed by the auditor, we can distinguish between three phases:
- Planning.
- Execution of field work.
- Preparation and issuance of the report.
Audit report
The audit report must include the following information:
- Identification of the audited company.
- Natural or legal person who commissioned the audit and to whom it is directed.
- Identification of the Annual Accounts.
- References to the Technical Auditing Standards.
- Auditor’s opinion.
- Auditor’s signature.
These reports, in the corresponding section of the technical opinion, the auditor must reflect the degree of agreement with the accounting information of the company. Many technological inventions make this job easy for auditors. We can find different types of opinion:
- Favorable opinion. This opinion means that the accounts have been prepared considering accepted accounting principles and have been applied uniformly in relation to the previous year.
- Qualified opinion. This type of opinion is applied when there are several circumstances that prevent the auditor from issuing a favorable opinion. However, that does not mean that the general assessment gives rise to a negative opinion. Some aspects that can generate these exceptions are the incomplete presentation of the information, errors in compliance and accounting principles, changes during the exercise of these principles.
- Unfavorable opinion. These opinions are issued when the auditor states that due to numerous errors, the annual accounts do not offer a true picture of the company’s situation. Some of the facts that may lead to this unfavorable opinion may be non-compliance with accounting principles, incomplete documentation, etc.
- Opinion denied. This type of opinion means that there is insufficient evidence to form an opinion on the annual accounts as a whole.
In this case, when the auditor issues and signs the report on the organization, he is responsible for the content on it. Due to the repercussion that said article may have on interested third parties and the claims that they could exercise.
External Audit vs Internal Audit
External audit and internal audit can be differentiated by several factors:
- The external audit is carried out by people outside the organization, while the internal one is completed by the company’s own employees.
- On the one hand, the interns find themselves in a much broader framework of analysis and auditing. The external audit offers reports of a standard nature and established by accepted standards of the profession.
- Both types of audits, in many cases have different objectives. The external audit reports are requested by the company and are valid for interested entities, while the internal report is only valid in the organization.
- The objective of the external accounting audit is to issue a report aimed at highlighting the auditor’s opinion. While the internal is to keep track on the fulfillment of operations.