The most important source of information about a company’s financial position is its financial statements. The preparation of financial statements is a complicated process that requires detailed analysis. The audit of financial statements is an activity that aims to assess the financial situation of an enterprise. During the audit of financial statements, various methods and tools of financial analysis are used.
Audit of financial statements – definition of the concept
An audit of financial statements is an activity that aims to assess the reliability and accuracy of the information contained in the financial report. This type of audit is carried out to determine whether the report meets all standards and regulations, and whether it contains all the necessary information. The audit of the financial statements can be carried out by an internal audit unit or by an external auditing firm. In the first case, all business entities are audited, while in the second case, only those whose shares are listed on the stock exchange are audited.
The purpose of auditing the financial statements is to determine whether the information contained in the report is fair and correct, and whether it meets all applicable standards and laws. The subject of the audit is also to determine the degree of investment risk of an entity. The audit of financial statements is aimed at protecting the interests of investors and enabling them to make informed and rational investment decisions. For this reason, audits of this type are mandatory for all listed entities.
What an audit of financial statements consists of
An audit of financial statements is an analysis of a document that presents a company’s assets and financial situation. It is conducted by a certified auditor who is authorized to perform this type of service. The purpose of an audit of the financial statements is most often to assess the degree of compliance with regulations and to determine whether it fairly reflects the facts.
The auditor does this by comparing the financial statements with the data contained in the books of account. If discrepancies are found, he may call for their correction.
Mandatory audit of financial statements
The audit of a company’s financial statements is an obligation that it must fulfill. It stems from the fact that running a business involves keeping a tax ledger. In order to keep such a ledger, it is necessary to have the appropriate financial documents.
Thus, the financial statement is the basic document that must be presented to determine the amount of income tax. However, it is worth remembering that the audit of financial statements is not only an obligation to the tax office. An entrepreneur also has an obligation to his partners or shareholders. This is due to the fact that they are the main recipients of the financial statements.
This is why the audit of the financial statements by a certified public accountant is so important – it allows for an objective assessment of the company’s financial situation. The audit of a company’s financial statements is therefore an obligation that the company must fulfill. It stems from the fact that running a business involves keeping a tax ledger. In order to keep such a ledger, it is necessary to have the appropriate financial documents. Thus, the financial statement is the basic document that must be presented to determine the amount of income tax.
