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

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 timeliness of 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 initially seek to control the activities of their subordinates and entire departments independently, in order to understand and delve into the state of affairs at their enterprise before external audit draws attention to particularly dubious moments. Therefore, often the owners of large firms attract outside specialists to carry out control and audit activities and identify any possible inconsistencies and weaknesses in the planned work process of their company. Thus, the company organizes an internal audit, the purpose of which is to verify the functioning of the accounting department and the related operational procedures conducted by the company as a whole.

The concept

What is an audit? In its immediate narrow profile meaning, this term means a set of control verification measures for monitoring, comparing, analyzing and evaluating the procedures performed by the employees of the accounting department at the enterprise, as well as determining the reliability of the data indicated in the reporting documentation. In other words, the main purpose of the audit is to verify the financial statements of the enterprise and make an appropriate written opinion on this. Specialists are attracted by company managers through the conclusion of a service agreement (in the case of an initiated audit). Audit firms are independent participants in the operational process at the enterprise, contributing to a transparent, objective and independent verification of accounting data at a specific facility.

For what?

In addition to its most important purposefulness, such a plan, the global event held at the enterprise has a number of private goals. Audit is an integral part of integrated work. Mandatory for each company both legislatively and on the initiative of the leadership of a particular company. It is carried out in order to identify weak links in the general chain of its functioning.

What are the private goals of the audit conducted by the company:

1. Verification of compliance of accounting at the facility with certain requirements described in regulatory enactments that directly regulate the procedure for accounting and reporting.
2. Verification of compliance of financial statements with the information at the disposal of the audit organization about its activities.
3. Confirmation of the accuracy of the reports submitted by the accounting department or the identification of their inaccuracy.
4. Conducting careful monitoring and control operations over the observance by the economic entity of the norms and rules stipulated by the regulation at the legislative level.
5. Identification of compliance of operations with the rules of accounting and reporting at the enterprise.
6. Carrying out control and audit procedures in the key of evaluating the obligations, 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, circulating, fixed assets.

And if the purpose of the audit is, for the most part, the identification, determination, assessment of the conformity of the accounting data obtained in the course of the study, then its tasks are aimed more at indicating to the management of the audited economic entity the problem areas and errors that require mandatory correction.

Tasks

If we talk about the tasks of external audit, they are largely consonant with its focus. Internal audit as its fundamental task evaluates:

• the correctness of the preparation of business contracts, as well as compliance with the conditions for their implementation;
• the availability and condition of property, as well as the efficient use of resources (financial, material, labor);
• compliance with established tariffs, prices, settlement and payment discipline, payments to extra-budgetary 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 money spent on production, the efficiency of using the profits and existing funds, the reliability of the reflected amounts of revenue from sales.

In addition to assessing the listed factors of conducting accounting activities by the enterprise, the audit tasks are aimed at developing and providing reasoned proposals with a view to improving the control of accounting discipline, increasing the efficiency of its organization, and rational changing the structure of production. In addition, one of the most important tasks of the audit is to advise the leaders and founders of the company, as well as specialists of divisions and employees of the management apparatus, in order to improve the quality of their work and make them more coordinated and rational decisions.

Principles

The principles on which the functioning of the studied representative offices are based are 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 the concept of “credit history” of the client, often used in 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 the inspector, from any kind of pressure and encroachment on the part of the object of verification or on the part of third parties. According to the norms of legislation, no one should exert any financial, moral, or criminal influence (threats and other) on the inspector.
2. Honesty is a fundamental principle that every auditor should be guided by during their audits. A prerequisite for an audit is its veracity, the accuracy of the information provided. And in this regard, the auditor's commitment to his professional duty in compliance with the principle of honesty and integrity is a basic aspect of his professional activity.
3. Objectivity - an exceptionally impartial assessment in the consideration of any issues should extend to the entire course of the audit, and to judgments, which will ultimately form an audit opinion.
4. Competence - only a specialist with the proper level of professionalism is able to conduct a properly organized audit.
5. Honesty - the careful, attentive and expeditious performance by the auditor of his duties is an integral part of his professional activity.
6. Confidentiality - non-dissemination of information obtained during the verification is prescribed in the fundamental conditions of non-disclosure of information (trade secrets).
7. Professionalism - provides for abstinence and avoidance by the specialist of actions that could compromise him or undermine the reputation of the entire audit firm.
8. Skepticism - a critical assessment and abstinence from any kind of condescension and concessions should become for the specialist the basis on which he will be guided in all his actions.
   

Destination

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

The main role of such inspections in the functioning system of any enterprise is assigned to identifying inconsistencies in the information submitted in the accounting statements (for government bodies) and identifying weak links in the work of the financial department (for the management of a company interested in optimizing the work of the staff of its own company).

The objects

Who is required to be audited? And who carries out activities for such verification at the company? In order to answer this question, it is necessary to understand the concepts of “mandatory” and “proactive”.

The first audit is provided for by the law “On Auditing”, therefore its implementation is justified at the legislative level. It applies to enterprises with the legal form of a joint-stock company, credit organizations, companies with annual revenue of over 60 million rubles. This concerns the question of who is subject to a statutory audit.

The second is a consequence of the personal initiative of the owner and his desire to know how the accounting operational work proceeds at his enterprise: do the numbers indicated in the financial statements coincide with the realities.

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

Stages

Like any planned and logically substantiated process, the audit is due to several interrelated stages of the conduct. What are they characterized by:

1. Planning is the first stage in the course of organizing an audit aimed at developing a general plan and an appropriate audit program. This also includes the preparation of an audit letter and the conclusion of a contract between the management of the economic entity and the audit representation.
2. Direct verification and data collection - provides a complete list of actions and activities aimed at identifying inconsistencies and discrepancies, if any, in the accounting information and financial statements.
3. Summing up and making a conclusion is the final stage of the audit, which is characterized by the compilation of relevant conclusions on the audit activities. Here, brief information about identified violations, links to documentation in which these violations surfaced, highlights variations of 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 report on the results of the audit.
   

Regulation

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

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

Procedures

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

1. Inspection - verification of records, information on paper, information presented in electronic form, as well as physical examination of tangible assets. The last paragraph provides for the inspection of assets and certification of their availability, but without the obligatory clarification of the fact of their belonging to a particular subject of economic activity.
2. Observation - is 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 entity within or beyond. Subsequently, an assessment is received of the response to the request. Requests may be official (executed in writing and addressed to third parties), or may be unofficial (submitted verbally as questions addressed to employees of the enterprise).
4. Confirmation - provides a response to the request sent by the audit representative to third parties. Such a message often acts as a response letter with confirmation or refutation of the information contained in the data provided by the accounting department. For example, this may be information about receivables and beyond.
5. Recalculation - this means checking the arithmetic calculations specified in the primary documentation and accounting records for accuracy and reliability. The auditor can perform repeated calculations independently, and can carry out them through information technology and adapted to a specific section of information block of software.
6. Re-examination - involves conducting now an independent audit control over the procedures that were originally carried out in the light of internal control measures.
7. Analytical procedures - are the final link in conducting the immediate stage of listening. Their meaning is to analyze and evaluate the information obtained during the audit, as well as to study the most important economic and financial indicators of the audited entity in order to identify distorted or incorrectly reflected in the accounting of business transactions.
   

results

The criteria for the mandatory audit for both LLC and other enterprises of the ownership form provides for the issuance of an appropriate opinion on the results of the audit. At the end of all control and audit procedures, the specialist assesses the completeness and quality of the measures taken, described in the paragraphs of the program and the general plan. The representative of the auditing company must submit an opinion on whether the financial statements are faithfully reflected, based on accounting rules. Here he points out that the procedures carried out were carried out in accordance with the provisions on second-hand and f / o, justified by law, and describes the results of his work. It is worth noting that the maximum permissible level of possible distortions in individual financial indicators is three percent.

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

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

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

Opinion in conclusion can be expressed in several of the most common versions:

• unconditionally positive - characterized by the 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 reliable and prepared in accordance with the established legislation, with the exception of some circumstances;
• negative opinion - indicates that the information prepared and provided by the employees of the accounting department does not comply with the regulation of the Law on Accounting and does not correspond to reality;
• refusal to express an opinion - is provided in extremely rare cases, accompanied by an excessive limitation of the scope of the audit, in which the specialist is physically unable to obtain a sufficient level of evidence.

The opinion of the inspector should be provided in a readable and understandable form for all.