Every company needs credible and reliable financial reports. This is because financial statements contain records of all transactions and are made to determine the performance and financial condition of the company.
Therefore, a financial report must go through an examination process so that its presentation is by the principles, standards, and rules that apply in a country.
Reports Requiring Audit
- Income statement
The Income Statement is one part of the company’s overall financial statements in one accounting period. This report consists of revenues and expenses made during the current period and expenses.
Therefore, it is not surprising that the income statement is called the most in need of an audit because this report will provide an evaluation of the company’s performance as well as become a benchmark in calculating the amount of tax that must be paid by the company.
- Balance sheet
The balance sheet is part of the company’s financial statements that contain information about assets, payment obligations to related parties in the company’s operations, and capital at a certain time. The balance sheet gives a summary of the assets and liabilities of the business. The balance sheet is prepared based on the idea that Assets = Liabilities + Shareholders’ Equity.
- Cash flow statement
A cash flow statement is a statement of cash and cash equivalents received and paid by the company during a certain accounting period. In other words, the contents of this report are financial records related to the company’s income and expenses during a certain period.
The cash flow statement proves to be very useful when the company wants to evaluate the financial structure (liquidity and solvency) and net assets of the company. In addition, companies can also use it as an adaptive strategy in dealing with changing financial conditions.
Why is there a need to audit your company?
Doing external audits is good for your company in many ways, after all, this is the only way to prove that the numbers you present are reliable. Thus, you prove that your company is a good business, especially for investors.
To establish yourself as a law-abiding company
The sustainability of the company cannot be separated from the applicable law. The audit process will ensure that your company has undergone business processes according to procedures and complies with the applicable laws and regulations.
Regular audits also show the company’s willingness to update with the latest regulations. Of course, this makes the company grow faster because it can be responsive and adaptive to all changes that affect the course of the business.
To get an organizational review
Audits allow you to dive deeper into the ins and outs of the business over the years. An independent auditor’s perspective gives you a different understanding of your business. The auditor’s findings can identify which parts of the system or procedures can be improved, as well as how to create opportunities to attract potential investors.
Working with external auditors who are experienced with clients like companies can produce more views about managing the business, growth opportunities, and risks that may arise in the future.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by
CA Aman Aggarwal
AKGVG & Associates