Role of External Audit process In Financial Statements
With the large size and growth of companies, it always needs an internal audit process to follow up on the extent to which their planned objectives are achieved and the correctness of the workflow. You also need to ensure that the required profitability is achieved and any errors or manipulations within them. To ensure the validity of internal audit reports, resort to an external audit process.
According to Law No. 125 of 2020, companies with a capital of more than 50 million and up to 200 million EGP were identified as medium and small companies. This means that thousands of Egyptian companies influence the national economy. Therefore, each company needs to carry out an external audit process.
However, with this law, the external auditor will face many difficulties in the audit process. The small size of the operations of these companies is an obstacle to the application of most external auditing standards. Still, the external auditor who is skilled in his work will carefully plan the appropriate criteria that can be implemented for the company’s status in a way that enables it to accurately and adequately express the validity of internal audit reports and financial accounting statements.
The general framework of the external audit process
What is the external audit?
External audit means resorting to an external intermediary that does not belong to the institution to perform a specific accounting function, which is to audit and examine all accounting books and documents of the company with extreme accuracy and to express its objective, impartial and deliberate opinion on them and their credibility and interdependence, and to express his opinion through reports in which it explains The validity of the general budget and the integrity of its final accounts made during the financial period to be audited.
We understand the importance of the external auditor's function within the company from this definition. However, some companies even dispense with the internal auditor's task in favor of external references because external references are considered more accurate and credible.
The American CPA has set out some conditions that must be met in the external audit process. These include having a high degree of scientific, practical, and technical qualification, having an independent and impartial mental and intellectual direction, and do not have a personal relationship with any individual within the company.
In addition, experience and fame play a significant role when selecting an accounting office to act as an external auditor. Therefore, the functions of an external auditor can be drawn as follows:
Consulting services provided by the auditor
- Carefully plan the external audit process and determine the audit method and criteria that suit the company.
- Analyze the results obtained from the audit tests.
- Committed to determining the fairness and honesty of the budget and financial statements.
- Appointed by the General Assembly of the Company but operates independently of the management of the leading company.
- Verify the safety of internal monitoring and auditing systems.
- Provides advice and recommendations to improve workflow and production.
- Committed to reporting on the efficiency of the company's accounting system.
- Using the latest technological and digital means to ascertain the results of his reports.
- Evaluate the company's systems, such as the internal control system and the efficiency of financial management.
- Ensure the extent to which the procedures and policies are applied and appropriate to the planned objectives.
- Ensure the actual practical performance of the company's departments.
- Assess and maintain the validity of the assets and assets that are proven in the books.
- Carry out periodic or sudden inventory work and identify any manipulation.
- Please contribute to examining reports received from the auditors and the extent to which observations they received are being implemented.
- Ensure that company regulation policies and other regulations are applied.
- Assess the commitment to the company's implementation of its long-term contracts.
- Verify how the company and its employees comply with government laws, regulations, amendments, etc.
- Make suggestions and recommendations for shortcomings and weaknesses within the company to modify them and strengths to motivate them.
Quality of accounting information and its impact on the decisions of users of financial statements
Disclose in external audit reports and ensure that every information and statement contained therein is accurate and correct. It dramatically affects decision-making, and disclosure and the quality of accounting information are sufficient to meet all the needs of different users of financial statements and reports.
Many recent studies have shown that external auditing affects 88% in improving the quality of financial statement data and information. In short, it plays a vital role in:
- Increase confidence in the information mentioned in the financial statements.
- Play a significant role in improving financial and accounting information to suit the company's situation.
- Finding the most accurate and best information and filtering incorrect and questionable information.
- Communication between the company's internal and external audits increases the spirit of working as a team.
Factors affecting the quality of external audit
- Professional and scientific qualification and practical experience of the auditor and examination of accounts.
- Adhere to the accepted accounting and external auditing ethics.
- Compliance with all international auditing standards and known controls for preparing financial accounting statements and reports makes the external auditor more confident in the transparency and clarity of these lists.
- Hence, company management needs to provide accounting information when it is requested and for the accounting period to be audited.
- The audit should be comprehensive for all aspects of the company, including human resources and various departments.
- Evaluate the company's performance by comparing the company's position during financial periods using the financial information contained in the reports.
- Audit reports and accounting lists contain the company's actual and planned information and data during the coming periods.
- The legal form of the company and the type of activity it conducts.
- As it is customary, Auditor fees are a direct relationship between the auditor's fees and the quality they provide. Fees increase with increased evidence, examination samples, and various auditing tools.
- Comply with tax and investment laws as they have regulated the work and clear the rights and duties of both the client and the references.
- External audit tools are used, such as proof guides and others. The more tools, the more credible the report is.
external audit services
With the increasing number of corporate accounting offices and increasing competitiveness among them to obtain the most significant number of customers, we also find that the consulting services are constantly increasing. For example, one of Egypt's most prominent accounting offices and the Middle East is an accounting office, "Egyptian Chartered Accountants."
Our team has provided the best accounting, legal and external audit services during several previous years. As a result, hundreds of companies shared their joy in achieving the success and profitability they wanted. Thanks to God, we have the scientific qualifications and practical experience that help us accomplish our work with the highest quality, The fastest time, and less expensive.
One of the most important services we provided was:
- Monthly, quarterly, semi-annual, and annual periodic audit reports.
- Prepare financial reports for regular accounting periods.
- Audit and examine all financial statements and accounting statements at the end of each financial period.
- Include thoughtful and proven observations and recommendations within the company with reports and letters directed to management.
- Prepare external audit programs following the nature and circumstances of your company.
- Affirm compliance with all international auditing standards and their amendments.
- Make surprise visits to the company over the financial period.
- Prepare, process audit reports, and deliver them to management.
- Evaluate the internal audit system within your company and write a detailed report on the evaluation results, accompanied by all the recommendations required and prepared by an audit consultant and specialized international experts to remedy the situation and fix all errors without loss.
- Provide audit services for general audit or particular purposes.
- Technical support is available throughout the day to provide all its accounting consultations and recommendations.
- Supervise and follow up inventory work on assets, inventory, and others.
- Prepare a complete record of fixed assets and assets, monitor, and maintain them.
- Our office offers the latest digital and electronic auditing methods and programs that help reduce audit errors, save time, effort, and speed of completion.
- Audit the format of accounting books and financial statements planned for the future and amend them in proportion to the company.
- Thanks to God, our team has the advantage of loving teamwork and communication skills, so we promise to cooperate with your company team for one goal of your company's success.
- Our office also provides all accounting, legal, and tax services.
ECPA office is one of the largest accounting companies in Egypt and the Middle East; we always strive to satisfy the customer and never give up our goal of achieving the best accounting, legal, tax, and auditing services. In addition, we seek to provide more.
We offer the first consultation service free of charge to our new clients.
We will be delighted to meet you soon, feel free to call us now.