HomeNEWSWhat is an external audit and when should companies use it?

What is an external audit and when should companies use it?

External auditing is essential for a company. Credibility is essential for companies to be able to attract more customers and investors, and with the external audit the company can efficiently prove the company’s current financial situation.

If there is no external audit, the company ends up showing less confidence and consequently alienates potential investors. But what is it really? How does it work and what is its purpose? Let’s see the answers to these questions below.

What this article covers:

What is an external audit?

In an external audit, a team unrelated to the company performs a kind of examination to test the integrity and veracity of the accounts of a particular company. In this examination, a series of technical procedures are carried out to verify that the company is actually complying with the accounting rules.

Source/Reproduction: original

After completing the examination, the “auditor’s report” is issued, which contains all the cash flow and financial performance of the company, in addition to other aspects related to the financial part.

What is the purpose of external auditing in companies?

The objective of an external audit is to prove the integrity of a particular company, verifying that the accounting rules are actually being followed. Auditing brings with it several benefits.

Among them we can highlight the increase in trust and credibility that the company gains with its customers and investors. In addition, with the data obtained, the company can also do better plans for your business🇧🇷

Another interesting point is that if the numbers obtained by the audit are positive, the company is able to attract more interest from investors.

When should a company perform an audit?

The audit is for companies that have an income above R$300 million, which are considered large companies. Audits should be done annually, or every 6 months. Auditors must be certified by the Securities and Exchange Commission, the CVM.

Why is an audit important?

External auditing is a fundamental part of the company. In addition to being mandatory, it also proves your company’s financial integrity and organization. Your company’s image gains more value and investors can see more clearly whether or not the company is a good investment option.

How is the external audit in companies in practice?

First, the auditor needs to know the customers and also the type of activity performed by the company. For this, the auditor must carry out a complete analysis of the internal part of the company. In this way, the auditor identifies which accounting standards apply to that company.

How is the external audit in companies in practice
Source/Reproduction: original

After that, the auditor will also request a sample of the company’s operations. These samples will be analyzed carefully, in order to find possible faults in the operations. Finally, the auditor issues a detailed report on the company’s finances.

What results can the external audit of a company present?

An external audit can present 4 different results. When the result is “Appear unqualified” it means that there is nothing irregular in the company. The “Opinion with reservation” means that despite almost everything being in compliance, there are still some errors.

In the “Adverse Opinion” the analyzes did not show evidence that the company is following the accounting standards. Finally, we have the “Opinion with abstention”, where the audit does not issue any opinion in the report, because the analyzes were not accurate enough.

With this, we can see that the external audit is really something important and helps in the proper functioning of the company, so be sure to invest in an audit for your business.

Must Read