Learn the Purpose of Financial Audit & Review in Companies

Corporate Secretary Service Indonesia – The term financial audit must be familiar to anyone who works in finance. This is a financial report that every company must own. Without an audit, the company will not know if there is an error or fraud, so the financial report becomes less valid. For those of you who are still unfamiliar, don’t worry! PortCorp will thoroughly explain the meaning of financial audits and their functions. That way, you are better prepared for a switch career.

What is a Financial Audit?

To achieve accountability, a company’s financial statements must first go through an audit & review process. A financial audit is a thorough examination of the financial statements and accounts of an institution, organization, or company. This process can be done independently, or by a public accountant who is a third party.

What is examined in a financial audit? This includes all historical data of the company’s operations, including financial statements, bookkeeping, invoice processing, and more. After all these components are reviewed, the company’s financial position can be confirmed, whether stable or deteriorating.

Companies need time and careful preparation to present a financial audit. Here are three basic steps to prepare one.

Find Relevant Sources of Financial Information

The sources of information needed in this process are ledgers, trial balances, books of accounts, financial statements, IRS documents, and accounting support documents. All these documents are useful for supporting the continuity of the financial audit and are reviewed period by period.

Collect Internal Documentation

In addition, you need to collect internal documents or process guidelines, such as handbooks, SOPs, department manuals, and bylaws.

Communicate with Internal and External Stakeholders

Remember to discuss dates and relevant information with external auditors, finance team members, accounting team members, and other stakeholders to create transparency in the auditing process. Communicating issues in advance makes the financial audit process more accessible to handle.

Read Also: How does Accounting Services Support Business Development?

Why are Financial Audits Important for Companies?

Financial audits are very important for companies, even SMEs. They support a company’s credibility, especially if it is looking for investors. With a financial audit, investors can form an opinion on whether the financial information presented is accurate and fair. If not, the company’s securities need to be questioned.

In addition, a financial audit will provide an overview of whether the company has followed the established reporting standards. The audit presentation will reveal whether the company’s financial position is honest. This will also help the company’s internal controls and systems.

Financial Audit Objectives and Functions

There are several functions and objectives of financial audits for companies. The following is an explanation below.

Internal Control of the Company

Financial audit & review helps detect and prevent fraud in management. Companies should routinely conduct audits and find operational inefficiencies. In this case, the auditor can point out any errors in the company’s internal control so that they can be evaluated for improving the internal business.

In addition, audited financial statements can also provide stakeholders with confidence that the company’s operations are carried out correctly, effectively, and according to objectives.

Fulfilling Obligations

Did you know that financial audits are mandatory for companies? This is regulated in the Company Law No. 40 of 2007 article 68, where the company’s board of directors is obliged to audit the financial statements by a public accountant if:

• The company collects and/or manages public funds
• The company is a state-owned company
• The company is a public company
• The company has a debt recognition letter to the public
• The company has assets and/or several businesses spread out with a minimum amount of Rp. 50,000,000,000.00 (fifty billion rupiah)
• Required by existing legislation

Knowing the Accuracy of the Company’s Financial Statements

The main purpose of a financial audit is to determine whether there is fraud in the company’s finances. The slightest manipulation can be seen in the audited report, so employees who prepare the report cannot present data carelessly.

So, when you need financial audit & review for your business and company, Portcorp is here as a solution for you. Portcorp is your comprehensive corporate secretary service in Indonesia. With our presence, you can get a dedicated company secretary to support you to what you need. Our company secretaries will track deadlines and file paperwork so your business keeps running smoothly. Contact us now on +6221-5020-8090 for your business succeed in the future!