The importance of finance auditing for companies in the current business environment

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FACULTY OF BUSINESS ACCOUNTING SCHOOL

ACADEMIC REPORT

“THE IMPORTANCE OF FINANCE AUDITING FOR COMPANIES IN THE CURRENT BUSINESS ENVIRONMENT”

COURSE

FINANCIAL AUDITING

AUTHOR:

MACHADO ROMERO, EVELYN NORMA

TEACHER:

MALCA LEÓN, JOSÉ RUBIN

Headquarters – Lima, Peru

2023

INDEX

INTRODUCTION        1

DEVELOPMENT        2

1.        Audit and auditing standards        2

1.1 Definition and types of audits        2

1.2 The professional practice of auditing        4

2. When should a financial audit be conducted?        5

3. Phases of the financial audit        6

REFERENCES        8

INTRODUCTION

To ensure the credibility of the financial statements, an audit should establish procedures to help obtain accurate information, draw reasonable conclusions, and provide a fair opinion on the presentation of figures in the financial statements.

 In addition, auditors review all reports. Anyone requesting such a service is responsible for the audit. The audit service is requested by any natural or legal person engaged in any economic activity. An audit can provide reassurance to the natural or legal person as to its business form and status'. The auditor must follow specific procedures to evaluate an item, or a group of economic facts related to the system under examination in order to make logical decisions.

It is a student-oriented text intended to serve as a 'foundation' for the development of the subject Introduction to Auditing and its doctrinal and normative sources. Using the Canvas Model, every innovative project can share its vision of its business model among the team members, with new incorporations to the company (to make it easier to land in the project), with future partners or co-founders, with mentors and even with investors, so that they understand the business model with all the relevant details. "The standards and procedures are detailed, providing basic guidelines for the conduct of audits in private companies.... The auditor's judgement is crucial in determining the various scenarios that occur during his or her work, it is stated. In addition, the document contains information on audit generalities, ethical principles, auditing standards, techniques, procedures, auditor's working papers and the report. Due to the presence of syllabic units in the subject, the topics are divided into three learning units.

This text will provide students with a broader view of auditing and prepare them for the practical practice of their profession.

DEVELOPMENT

1. Audit and auditing standards

The existence and development of the economic society is mainly based on financial information and knowledge, which represent a true representation and picture of the organisation. People using financial statements feel a certain level of comfort in examining the information before them. This confidence is based on the opinion of independent auditors.

1.1 Definition and types of audits

Auditing is a systematic process to obtain and evaluate evidence in an objective way and is applied in different activities of the social organisation: private and public companies, entities of other sectors, fiscal, operational, environmental, forensic, IT, etc. Thus, we can distinguish tax auditing, financial auditing, administrative or management auditing, operational auditing, governmental auditing, environmental auditing, academic auditing, forensic auditing, etc.

1.1.1 Tax audit

This is the examination of a company's compliance with its tax obligations and can be of a preventive or fiscal nature. The preventive examination is voluntary and is carried out by independent auditors specialised in taxation. The fiscal examination is mandatory and is conducted by the Tax Administration (Sunat, SAT) to determine the veracity of the results of operations and the financial situation declared by taxpayers in their tax returns.

1.1.2 Financial Audit

It is a process carried out by independent or expert auditors, who examine and verify the economic and financial information contained in the financial statements as a whole, processed according to generally accepted accounting principles, which in our country are the International Financial Reporting Standards (IFRS), with the aim of issuing an opinion through an audit opinion on the reasonableness or reliability of the figures. The examination requires the verification of the legality and regularity in the use of resources, taking evidence through the use of planned techniques and procedures and rigorously following the guidelines established in international auditing standards. Although the auditor's opinion enhances the credibility of the financial statements, users of the financial statements should not rely on the auditor's opinion as an assurance about the future viability of the entity, or about the efficiency or effectiveness with which management has conducted the entity's affairs.

1.1.3 Management audit

It evaluates the adequate fulfilment of the company's functions, operations and activities, mainly in the administrative aspect. It is the verification of compliance with established policies and practices, as well as with external standards, its internal control and the reasonableness of the use of its material and human resources, its capacities and competencies, including the review of its organisational structure.

1.1.4 Operational audit

Its object of study is the administrative process and operations of organisations. It examines the areas of functioning and/or operation of a company or entity to establish whether adequate controls are in place to operate efficiently. It mainly focuses on the evaluation of the company's internal control system.

1.1.5 Government Audit

It is the exhaustive, systematic and concrete review of all financial and administrative activities and operations carried out by the governmental entities that make up the State at its three levels: central, regional and local governments, as well as other public sector organisations.

1.1.6. Environmental audit

This is an evaluation of the quality of the air, atmosphere, environment, water, rivers, lakes, and oceans, as well as the conservation of flora and wildlife that are threatened by entities and especially by people. The auditors are responsible for verifying compliance with national and international environmental policies and regulatory requirements, examining the equipment and industrial processes of companies, determining the degree and effects of pollution and the risks it generates, and determining the preventive and corrective measures needed to protect the environment.

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