What Can Accounting And Financial Auditing Do For The Management Of Your Business?

by Aaa Cas Auditors & Business Consultant in Dubai

Accounting and financial auditing are tools that multiply the company's results, ensure its survival in the market and enhance its development to ensure competitiveness with competitors.

 

This is due to the fact that the accounting and financial sectors are fundamental nuclei for maintaining the financial health of businesses of any branches and sizes. Despite the importance of these issues, it is common for entrepreneurs to confuse the performance of both audits.

 

Understanding the concepts and differences, as well as the objectives, benefits and limitations of each of these audits, will bring the business an economic and financial order.

 

With this information, the manager will know which of the two services is appropriate in each situation and how they will assist the business. While reviewing this publication, you will find all of this content in detail. Good reading!

 

What Are The Concepts And Differences Between Accounting And Financial Auditing?

 

The audit consists of a procedure in which the auditor examines, analyzes, corrects and certifies the activities carried out by an organization related to finances and its assets.

 

Its purpose is to analyze whether all the company's processes are in accordance with the provisions of the legislation on the subject ( legalization ), as well as to guarantee the effectiveness of the activities performed by the company.

 

ACCOUNTING AUDIT

 

As for the accounting audit, it consists in the analysis of documents whose purpose is to verify and certify the accounting balances, that is, the accounts of the financial statements are analyzed and verified if they are in accordance with the company's financial, financial and economic situation.

 

The focus of this service is to avoid distortions, errors, fraud and prevent irregularities, which makes information more concrete, secure and transparent. In addition, it also identifies possible flaws in the financial system and corporate internal control.

 

The auditor makes use of technicians and processes that verify the accuracy of the accounting records, as well as evaluates the audited company's internal controls. This professional recognizes the occurrence of facts that compromise the entity's assets and informs the attitudes that will solve this problem.

 

FINANCIAL AUDIT

 

Financial auditing, on the other hand, focuses on increasing the degree of confidence in users' financial statements. In this service, the person in charge certifies that the physical amounts of the organization are in accordance with the balances recorded in the statements issued by banking or financial institutions, the accounting records and the daily cash control.

 

This professional will also have the responsibility to verify that the company's capital is being invested according to financial planning .

 

In addition, he notes whether the internal controls of the finance department can prevent further irregularities and fraud. For this, the auditor maps all the department's processes, such as payments, reconciliations, transfers, etc.

 

MAIN DIFFERENCES

Many scholars treat both concepts as if they were the same service, this is due to the fact that when the accounting inspection techniques are applied correctly, they end up encompassing those of financial inspection. However, the instruments evaluated are essentially different:

 

accounting audit: assessment of the adequacy of the financial statements;

financial audit: evaluation of the company's financial controls, which are both accounting and operational.

 

WHAT ELSE DO YOU NEED TO KNOW ABOUT ACCOUNTING AUDITING?

 

Each of the two audits follows different rules, performs different procedures, has particular benefits and limitations. As for what is offered by the accounting audit, check the main advantages of the service to companies and the limits of the auditor's performance.

 

BENEFITS

 

This audit makes it possible to obtain the best data on the real financial, economic and patrimonial situation of the audited organization.

 

The professional checks the efficiency of the company's internal controls, so the accounting records are aligned with the real plan, as well as having all the necessary information in detail. This is achieved by performing acts such as:

 

• optimize accounting processes, in accounting, preparation of statements, balance sheets and reports ;
• examine the entity, identify and correct flaws in management;
• opine on the adequacy of the financial statements;
• adjust accounting processes to international standards;
• inform the degree of solidity of the patrimony and the evolution of the national economy.

 

All of these features guarantee a wide range of benefits such as:

 

• high security for everyone interested, from shareholders, partners, partners and others;
• greater investment attractiveness for investors;
• preventing the occurrence of embezzlement of assets and improper payments;
• contribution to compliance with tax laws, which minimizes penalty cases that are excessively expensive;
• more beneficial decision-making, as it ensures the veracity of the information;
• contribution to the development of the company, because the finances will be stronger and more balanced;
• more tranquility in the institution in general, including employees, as it increases the probability of their survival in the market.

 

LIMITATIONS

 

Often the company has inconsistencies of a non-accounting nature, meaning that the equity control covers other areas, such as manufacturing.

 

This is more common in cases where the audit is carried out on low quality projects or due to poor regulation of machinery, which is a type of control that is outside the investigation of accounting auditing.

 

WHAT ELSE DO YOU NEED TO KNOW ABOUT FINANCIAL AUDITING?

 

Although financial auditing is similar to accounting auditing in certain aspects, it still provides different qualities, as well as other limitations. Understand them below.

 

BENEFITS

 

The financial audit focuses on ensuring that the accounting balances and internal controls related to suppliers, partners and customers match the real position of the open securities. Thus, the auditors:

 

• inspect and study financial control to avoid fraud and errors;
• point out flaws in the internal controls of the financial department and in the administration in general;
• create barriers to diversion of capital and assets, as well as undue exits;
• contribute to compliance with tax laws.

 

The listed acts are able to generate benefits such as:

 

• reducing the risk of paying penalties under tax legislation;
• ensuring greater billing certainty by preventing fraud and diversion;
• establishment of the company's real value to shareholders and investors;
• confirmation of the institution's external financial health status to employees;
• inhibiting future failures by improving controls in the finance department;
• Increased business opportunities, as this audit improve reputation and is a prerequisite for obtaining loans.

 

It is perceived that it benefits different parties and reaches the company, its employees and interested third parties.

 

LIMITATIONS

 

There are shareholders who do not believe in any financial Auditors in Dubai, this is because it is possible that there is fraud in these services. It is essential that the manager does in-depth research on this operation to hire honest and reliable professionals, so that he will take advantage of all the benefits listed.

 

Hiring accounting and financial auditing services contributes to the healthy development of any company. In an increasingly competitive market, these are indispensable resources to maintain your competitiveness in relation to competitors.

Read also: Using specialized ERP software: Avoid common mistakes

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Created on Jan 11th 2021 12:57. Viewed 346 times.

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