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An audit of a company's financial report is known as an audit. It is usually presented in the company's annual report prepared by auditors. As a rule, it relates to a specific previous accounting period. The audit report, which is based on a selective review of the company's performance, is the mandatory requirement after the audit is complete. The report contains an income statement, a balance sheet, a statement of changes in equity, a cash flow statement and explanations with a summary of the main accounting and valuation methods.
An audit reflects the financial condition of the company at any given point in time, including information that everything that a company owns and owes is properly recorded on the balance sheet and its losses and profits properly valued. The financial report must be prepared in accordance with certain statutory provisions. If the report is prepared, it must be approved by the company's executives (e.g. the board of directors) through an assessment of its accuracy.
Audits can also include: asking formal and informal questions, examining tangible items owned by a company such as mechanical and electrical equipment, obtaining written confirmations, testing and monitoring certain procedures that are carried out on the company's premises.
Auditing standards
The standards for the proper audit of the financial report are set by a government. International Auditing Standards (ISAs) are available on the Internet that contain clear statements that auditors should take into account. They consist of an introduction, objectives, definitions, requirements expressed by the phrase “The examiner should”, application and other explanatory material.
There is also an E-Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Proouncements published in December 2016 and available on the internet with translations in English, Arabic, Bulgarian, Danish, French, Georgian, French, Available in Kazakh, Italian, Serbian, Russian, Spanish and Thai (for more information, see https://www.ifac.org/publications-resources/2016-2017-handbook-international-quality-control-auditing-review-other ). It includes considering laws and regulations when auditing financial statements and amendments and other international standards consisting of new requirements addressing non-compliance with laws and regulations (NOCLAR) in the IESBA Code of Ethics for Professional Accountants.
Basic principles of auditing
There are general principles and responsibilities with regard to the general auditing standards as well as the tasks of the auditor AS 1001. For example, the consideration of materiality when planning and performing an audit, which has a direct effect on the determination of the financial statements. AS 1005, which indicates independence in intellectual attitude, is to be upheld by the auditor or auditors. AS 1010, which stipulates the training and knowledge of the independent auditor and that an independent auditor represents a person who is skilled in accounting and auditing. AS 1015, to explain the duty of care when carrying out work. Other sections of Auditing Standards include general concepts. They contain a detailed description of the audit risk, audit evidence, and the relationship between audit standards and quality control standards. General activities describe the monitoring of the audit assignment, the audit documentation, the work of a specialist and the quality inspection of the assignment. Auditor communications describe communication with audit committees and communications about lack of control in an audit. Audit activities include audit planning, reporting and risk assessment. The auditor's reporting includes requirements for reports, annual financial statements and dates. Matters related to filings under federal securities laws, as well as other matters related to audits, include a perspective on responsibilities and reviews of financial information.
Audits help understand and evaluate the company's activities, take into account the economic aspects of the company that may affect its business, identify risks that can affect the company's financial condition and performance, and then create a business plan that reflects that Company helps to improve all data collected.