It is quite common at the end of the accounting year, as it is able to demonstrate whether the accounting was carried out correctly, allowing the manager to know the real situation of the organization. In this way, the audit helps to prevent losses and contributes to the growth of the business.
In this post, you will understand the importance of auditing company accounts, especially at the end of the accounting year. Continue reading and check it out!
What is the fiscal year?
Before understanding the importance of accounting auditing, it is interesting to know what the fiscal year is. This term is used to describe the period in which private or public entities must account for their accounts.
It lasts for 12 months and is usually divided into 4 quarters to facilitate accountability. Furthermore, this division makes it possible to identify fluctuations in performance, payment flow and other activities, making the process more transparent for those involved.
Thus, at the end of the accounting year, it is common to survey all accounts to verify the company’s situation and ensure compliance with obligations.
What is Accounting Audit?
Now that you know what the fiscal year is, you should understand what the accounting audit is. This action is performed by an auditor who can be internal or external. The professional is responsible for checking, analyzing and validating the company’s financial information.
That is, it verifies the movement of the cashier, books of records, asset movements, tax collection and other accounts of the organization.
In this sense, the objective of the accounting audit is to verify the authenticity of the records and financial statements referring to the movements that alter the company’s assets. For this reason, this process must be done regularly.
It is interesting to carry out the audit especially at the end of the accounting year. In this way, it is possible to start the next year with the accounts in order, facilitating the preparation of new records and the organization of documents.
What is the function of the accounting audit?
After understanding what accounting auditing is, you must learn what it is for. Through it, it is possible to identify whether the company’s equity is compatible with the information verified in the audit.
This is because one of the main activities of this process is to analyze the data published in income statements and balance sheets. Thus, an analysis is carried out to understand whether this information corresponds to that presented in the company’s financial records.
In the accounting audit, verification of the organization’s internal processes can also be carried out. For example, procedures related to the organization’s financial data flow. In this way, it is possible to ensure the preparation of true documents.
It is worth mentioning that any area of the company that presents financial information, such as budgets or the purchase of materials, for example, can be audited. Furthermore, the process can be used to redefine financial information control and storage strategies.
What are the types of audit in accounting?
As you have seen, there are two types of accounting audit: internal and external. As each has an essential role for the company, it is important to understand more about them. The first is carried out by professionals from the company itself and must be done periodically.
Thus, the responsibility of internal audit is to verify that the organization’s policy and regime are complied with. This analysis may involve one or more sectors of the company and even business partners and suppliers, for example.
The external audit is carried out by a company hired to verify the financial statements in relation to the company’s assets. In this way, it also evaluates the processes and the way they are documented.
The audit is also responsible for presenting reports with the results of the action and indicating the critical points of the company analyzed. In this way, the company can correct and prevent problems related to its accounting area — such as errors in statements — and make improvements.
What are the benefits of auditing company accounts?
Now that you know what types of audits are, you should know the benefits of this action on your company’s accounts. Look!
Identifying financial failures
A company’s financial flow is accompanied by reports , statements and other accounting processes. For this reason, it is subject to failures related to the calculation of finances.
Through the reports prepared by the audit, it is possible to change the internal processes that generate these problems, in a simple and quick way. Thus, these errors can be prevented from causing negative impacts on business performance.
Improved internal controls
With the audit, the company can improve its internal controls. This is because it evaluates accounting processes, such as reports, statements and other documents, in a deeper way.
In addition, the audit identifies the necessary changes in the verification of these procedures so that they are adequate.
Compliance with tax laws
The payment of taxation should be one of the company’s concerns. After all, it is necessary to make sure that the organization complies with tax laws.
With the audit, the company can check if it is paying taxes correctly. In this way, the risk of fines or other sanctions caused by failures in tax calculations is avoided, as well as unnecessary expenses with payments in excess of the amounts due.
Adaptation to international standards
If the company’s intention is to open its doors to foreign investors, it is imperative that it has accounting processes in line with international standards. With the accounting audit, the organization has validated information and more organized documents.
This improves its image in the domestic and foreign markets, making investors more secure in investing their funds in the company.