The external audit serves to ensure that the company’s management in financial areas is in order, analyzing all the data, seeing possible errors and thus, you manage to keep your company healthy.
This type of service is performed by an auditor who thoroughly analyzes all information about income, investments, income, payments, and expenses for a given period in order to make sure that everything is in order.
But how is this analysis performed? What are the differences between an internal and external audit? What are the benefits of this type of service for a company? Check out everything you need to know about external auditing in this text.
What this article covers:
What is external audit?
As already mentioned, the external audit is a detailed analysis of all information related to accounting and transactions made in a company in order to verify that all reports, financial transactions and results are following accounting guidelines.
At the end, a report with everything that was analyzed and the result of this analysis is delivered to the person in charge. In order to promote greater control of these results and reinforce the reliability of the company’s information along with the department.
How important is the external audit?
An external audit manages to ensure that all accounting practices are within normal limits, in addition to legitimizing all accounting documentation. Providing increased confidence of the company with its public, with proof of accounting documents and improving the company’s management.
The audit process also helps to enhance the company’s veracity, in addition to helping with the company’s planning and strategies.
How does the external audit work?
The first step of the audit is the auditor, the person responsible for carrying out the analyzes to verify in depth the type of business. In addition to analyzing how the company’s internal control is carried out.
It is according to this first opinion that he will start to verify which accounting standards are compatible with the company he is auditing.
The auditor’s analysis is carried out in detail with the aim of finding possible errors and asking the company to correct them. At the end of his work, he assembles a report with the result of his analysis, which will include what was found after this detailed analysis.
What is the difference between external audit and internal audit?
While in the external audit we have an auditor who will carry out a detailed analysis to find out if the company is up to date with its information and accounting standards, the internal audit is carried out together with the company’s employees, who suggest improvements in their working conditions and processes with the auditor.
This auditor collects testimonials from all employees, who explain to him what they want to improve in their sectors, better wages, and other issues related to the company that are taken through a report to those responsible who apply or reject the requests.
What are the objectives of an external audit?
The objective of the external audit is to ensure that the audited company has its financial security and the veracity of its accounting information up to date and within the rules.
In addition, the external audit has the function of having new investments, fulfilling the legislation normsensure the confidence of shareholders and business investors, and validate accounting records.
Performing an external audit is important to keep your business healthy, which establishes credibility with your investors. In addition to ensuring transparency with employees and customers, keeping the company balanced.