Things you need to know about the external audit
Keeping a record of your accounts and financial activities is significant. Ensuring that the records found are transparent and valid is one of the main tasks of an organization. This transparency is only possible by quality audits.
Auditing is an integral part of any company's accounts section. Every organization performs an audit every once a year or by the end of the month. For this purpose, they have their internal auditors and also hire external auditors. Many consultancies help provide audit services; if you are one of the companies or businesses searching for an audit consultancy, consider top audit firms in Dubai.
The types of audits are generally internal and external audits; here, we will discuss some of the factors and benefits of external audits.
What is an external audit?
To check whether the financial statements presented matches the actual financial records or not. The validity of financial reports with the existing reports is known as an external audit—revising the company's income statement, cash flow, and financial position are the essential tasks to consider in an external audit.
Who performs an external audit?
A person outside the organization performs an external audit. That is why the reports are said to be reliable and transparent. An external auditor has no concern with the organizational goals and other issues. The auditor does not have to fear anything while sharing the opinion.
What are the limitations of the external audit?
It is one of the external auditors' responsibilities to identify irregularities and frauds, but this is not always the case. External auditors sometimes cannot detect fraud due to the scams by the groups within the organization. These groups have made sure not to get caught, and they may hide realities.
Why is an external audit so important?
- Validation of the account and financial reports of the company
- To identify frauds and thefts within the organization
- Identification of the sensitive tasks of the organization and suggestions on how to improve the overall performance
- Helps in decision-making for the people who are interested in buying a business or a company.
- Owners and the board of directors can oversee the business progress and ensure that the business tasks are working per planning.
- The critiques on the organization's activities and operations will be independent when done by an external auditor.
- The external audit makes sure that the financial reports and accounts are following the accounting principles.
- One can improve an organization's overall operations and performance by identifying deficiencies and risks.
- Highlights the issues that are not receiving much attention.
What is the difference between external and internal audits?
An external audit is way different from an internal audit. One of the significant differences is that an external audit is responsible for only taking care of its limited operations. On the other hand, an internal audit has concerns with all the aspects of the organization.
An internal audit is mostly opinionated and has suggestions on improvements necessary for the organization's progress. In contrast to this, external auditors' responsibilities are predefined and bound to work within the boundaries. Not all the organization's operations are shared with an external auditor; only a few things are to be revised by the external auditor.
Read more about Internal And External Audits
When to go for an external audit
Go for the external audit when the internal audit reports are received. Because it will help calculate the organization's overall transparency, and the decisions made for the future of the organization will be clear and defined.
Who will receive the external audit report?
Overall the external audit reports will benefit the whole organization and are necessary to continue its activities. The business owners or shareholders receive a higher number of benefits from such reports when they do not actively participate in business activities but are highly concerned with the organization's progress and performance.
The shareholders get an idea of the company's progress by merely looking at the final audit report. This report highlights the main issues that were ignored and not under consideration to bring any improvement. Shareholders get an idea about decisions to make in the future to improve organizational performance.
What are the reasons that make an external audit reliable?
One of the critical factors that makes an external audit reliable is that it's a report received that consists of independent opinions and suggestions. The report's outcomes and results are not biased and favor the organization's success and progress. The person carrying out the audit has no concern with the organizations' activities, and the type of report does not affect the cost for his/her efforts. That is why the information received by external auditors are reliable and has a more significant percentage of transparency.
Also, select your external auditor wisely. Consultancies will help you get yourself the best possible auditors. Top audit firms in Dubai have experienced auditors for reviewing your financial records.