What is the purpose of the audit, the objectives of the audit

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

An enterprise of any level and any nature of activity operates on the basis of a specific territorial affiliation and subordination to the laws of a specific territorial administration of state power. If we talk specifically about commercial entrepreneurship, then here control over the correctness of filling and timely submission of reporting documentation to the relevant authorities is carried out at a fairly serious level. Accordingly, this factor contributes to the fact that the leaders of large and small firms tend to initially control the activities of their subordinates and entire departments on their own in order to understand and delve into the state of affairs in their enterprise before an external audit pays attention to particularly dubious points. Therefore, it is not uncommon for the owners of large firms to involve external specialists to carry out control and audit activities and identify any possible inconsistencies and weaknesses in the systematic workflow of theircompanies. Thus, an internal audit is organized at the enterprise, the purpose of which is to check the functioning of the accounting department and related operational procedures carried out in the company as a whole.

Concept

What is an audit? In its direct narrow-profile meaning, this term means a set of control verification measures for monitoring, comparing, analyzing and evaluating the procedures performed by employees of the accounting department at the enterprise, as well as determining the reliability of the data indicated by them in the reporting documentation. In other words, the main purpose of the audit is to check the financial statements of the enterprise and issue an appropriate written opinion on this matter. Specialists are attracted by the heads of companies by concluding a contract for the provision of services (in the case of an initiated audit). Auditing firms are independent participants in the operational process at the enterprise, contributing to a transparent, objective and independent verification of accounting data at a particular facility.

What for?

In addition to its most important target purpose, such a plan, a global event held at the enterprise has a number of private goals. Audit is an integral part of complex work. Mandatory for each enterprise, both by law and at the initiative of the management of a particular company. It is carried out in order to identify weak links in the overall chain of its functioning.

What are the particular goals of the ongoingaudit firm:

1. Checking the compliance of accounting at the facility with certain requirements described in regulations that directly regulate the procedure for accounting and reporting.
2. Checking the compliance of financial statements with information at the disposal of the audit organization about its activities.
3. Confirmation of the reliability of reports submitted by the accounting department or identification of their unreliability.
4. Carrying out careful monitoring and control operations for compliance by an economic entity with the norms and rules stipulated by the regulations at the legislative level.
5. Identifying the compliance of ongoing operations with the rules of accounting and reporting in the enterprise.
6. Carrying out control and audit procedures in terms of assessing liabilities, assets and equity of the enterprise.
7. Determination of the completeness, accuracy, reliability of the information reflected in the accounting in the form of expenses, income, financial results for a specific period selected for verification.
8. Finding reserves and ways of the most optimal use of own and borrowed financial, working capital, fixed assets.

And if the purpose of the audit is mostly to identify, determine, assess the compliance of the accounting data obtained during the study, then its tasks are aimed more at pointing out the management of the audited economic entity to problem areas and errors that require mandatory correction.

Tasks

If we talk about the tasks of external audit,they are in many ways consonant with its target orientation. Internal audit considers as its fundamental task:

• correct drawing up of business contracts, as well as compliance with the conditions for their implementation;
• availability and condition of property, as well as the efficiency of the use of resources (financial, material, labor);
• compliance with established tariffs, prices, settlement and payment discipline, payments to off-budget funds and taxes;
• examination of the balance sheet, financial statements, as well as the correctness of the organization of accounting at the object of verification;
• examination of the objectivity of the funds spent on production, the efficiency of using the profits received and existing funds, the reliability of the reflected amounts of revenue from sales.

In addition to evaluating the listed factors of accounting activities by an enterprise, the tasks of the audit are aimed at developing and providing reasoned proposals for improving the control of accounting discipline, increasing the efficiency of its organization, and rationally changing the structure of production. In addition, one of the most important tasks of the audit is to advise the managers and founders of the company, as well as specialists from departments and employees of the management apparatus in order to improve the quality of their work and make more coordinated and rational decisions.

Principles

Principles on which the activities of the functioning study representations are based,closely intertwined with their goals. Audit is the most important stage in the formation of the accounting history of a particular enterprise. Probably, many are familiar with such a concept as the "credit history" of the client, often used in the banking infrastructure. So, in this case, the audit plays an important role in determining the integrity of the company as a law-abiding subject of economic activity. And one of the important roles in this vein is played by specific principles. Which are guided by audit firms in the course of control and audit activities. What are these principles:

1. Independence - provides for the complete release of the auditor, as an auditor, from any kind of pressure and encroachment from the object of verification itself or from third parties. According to the norms of the law, no one should exert financial, moral, or criminal influence on the inspector (threats, etc.).
2. Integrity is a fundamental principle that every auditor should be guided by during their audits. An obligatory condition for conducting an audit is its veracity, the reliability of the information provided. And in this vein, the auditor's commitment to his professional duty in compliance with the principle of honesty and integrity is a basic aspect of the implementation of his professional activities.
3. Objectivity - an exceptionally impartial assessment in consideration of any issues should extend to the entire course of the audit, and to the judgments that will ultimately form the audit report.
4. Competence is onlya specialist with the proper level of professionalism is able to conduct a properly organized inspection.
5. Integrity - careful, attentive and prompt performance of the auditor's duties is an integral part of his professional activity.
6. Confidentiality - non-disclosure of information received during the verification is prescribed in the fundamental conditions of non-disclosure of information (trade secrets).
7. Professionalism - involves abstinence and avoidance by a specialist of actions that can compromise him or undermine the reputation of the entire audit firm.
8. Skepticism - a critical assessment and refraining from any kind of indulgence and indulgence should become for a specialist the basis by which he will be guided in all his actions.

Purpose

What is the essence of the audit and what is its purpose?

Objects

Who is subject to mandatory audit? And who conducts such verification activities in the company? In order to answer this question, it is necessary to understand the concepts of "mandatory" and "initiative".

First audit providedthe law "On Auditing", so its implementation is justified at the legislative level. It applies to enterprises with the organizational and legal form of a joint-stock company, credit institutions, companies with annual revenues of more than 60 million rubles. This is with regard to the question of who is subject to mandatory audit.

The second is the result of the owner's personal initiative and his desire to know how the accounting operational work is going on at his enterprise: whether the figures indicated in the financial statements coincide with the realities.

Such checks are carried out by representatives of independent audit firms.

Steps

Like any systematic and logical process, an audit is conditioned by several interrelated stages. What they are characterized by:

1. Planning is the first stage in the course of organizing an audit, aimed at developing an overall plan and an appropriate audit program. This also includes drafting an audit letter and entering into a contract between the management of the economic operator and the audit office.
2. Direct verification and data collection - provides a full list of actions and activities aimed at identifying inconsistencies and discrepancies, if any, in accounting information and financial statements.
3. Summarizing and issuing an opinion is the final stage of the audit, which is characterized by the drawing up of appropriate conclusions aboutaudit activities carried out. It highlights a summary of the identified violations, links to the documentation in which these violations surfaced, variations of the various administrative sanctions provided for in this vein, as well as a description of the actions necessary to take to eliminate the violation. All these data are reflected in writing in the audit report.

Regulations

The audit is directly or indirectly regulated by the list of relevant legislative acts. These should include:

1. Law 402-FZ "On Accounting".
2. Law 199-FZ "On Auditing".
3. List of IFRS (International Financial Reporting Standards).
4. Resolution No. 696 "On Approval of Federal Rules (Standards) of Auditing"
5. ISA List (International Standards for this type of inspection).

Procedures

Among other things, in addition to the goals, objectives, principles and stages, for a complete understanding of the essence of the auditing process, it is necessary to study the operations related to it. What are the fundamental aspects of conducting audit procedures:

1. Inspection - verification of records, information on paper, information submitted electronically, as well as physical examination of tangible assets. The last paragraph provides for the inspection of assets and certification of their presence, but without the obligatory clarification of the fact of their ownershipspecific subject of economic activity.
2. Observation - characterized by a set of actions aimed at studying a process or procedure performed by other persons (employees of an economic entity).
3. Request - provides for the need to search for data from knowledgeable representatives of the audited enterprise within or behind them. Subsequently, the response to the request is evaluated. Requests can be formal (made in writing and addressed to third parties), or they can be informal (submitted orally as questions addressed to employees of the enterprise).
4. Confirmation - provides a response to a request sent by the audit office to third parties. Such a message often acts as a response letter confirming or refuting the information contained in the data provided by the accounting department. For example, this could be information about receivables and so on.
5. Recalculation - refers to the verification of arithmetic calculations specified in the primary documentation, and accounting records, for accuracy and reliability. The auditor can perform re-calculations independently, or can carry them out using information technology and a software block adapted to a specific section of information.
6. Re-audit - involves now independent audit control over the procedures that were originally carried out in the key of internal control activities.
7. Analyticalprocedures - are the final link in the immediate stage of the audit. Their meaning is to analyze and evaluate the information obtained during the audit, as well as to investigate the most important economic and financial indicators of the audited entity in order to identify distorted or incorrectly reflected business transactions in accounting.

Results

The mandatory audit criteria for both LLC and enterprises of other forms of ownership provide for the issuance of an appropriate conclusion on the results of the audit. At the end of all control and revision procedures, the specialist assesses the completeness and quality of the measures taken, described in the points of the program and the general plan. The representative of the auditing firm is obliged to submit an opinion on whether the financial statements are reliably reflected, based on the accounting rules. Here he indicates that the procedures carried out were carried out in accordance with the regulations on used and f / o, justified by law, and describes the results of his work. It should be noted that the maximum allowable level of possible distortions in certain financial indicators is three percent.

The documentary result of the audit is the preparation of an audit report and conclusion. Specifically, the audit report includes a list of the following mandatory details:

• document name;
• name of economic entity;
• auditor information;
• data about the audited object;
• prologue;
• analytical component with a description of the procedures performed;
• Auditor's opinion;
• date of conclusion;
• signature of the inspector.

Directly the conclusion is signed by the head of the audit firm and the person who was audited, with the obligatory indication of the validity period and number of his qualification certificate. Naturally, the signatures are sealed with a wet seal.

An opinion in a conclusion can be expressed in several of the most common versions:

• unconditionally positive - characterized by confirmation of absolutely reliable and objective information submitted by the accounting department of the enterprise as financial statements with all assets, liabilities and financial results for a specific period of time;
• opinion with a reservation - provides for the recognition by a specialist of information as reliable and prepared in accordance with established legislation, with the exception of certain circumstances;
• negative opinion - indicates that the information prepared and provided by the employees of the accounting department does not comply with the regulations of the law "On Accounting" and does not correspond to reality;
• Disclaimer of Opinion – Provided for in extremely rare cases, accompanied by excessively limited scope of the review, in which the specialist is not physically able to obtain a sufficient level of evidence.

The opinion of the inspector must be provided in a form that is readable and understandable to all.