Audit is an objective review of a subject matter such as financial statements and internal controls based on commonly accepted standards by a third party that is independent of the organization or department which has direct management and control.
An audit report is more than just a long list of numbers. It is, in its core, a narrative of a company’s aspirations and accomplishments. An audit report tells the story of a company in the language auditors know best: numbers. It shows how the company is performing and where it financially stands. An audit report provides both significant and relevant insights that should guide companies in making decisions that will ensure the companies’ welfare both in the short and long term runs.
Before moving the discussion forward to the specifics in auditing and why your company needs to be audited, let us first dwell on the differences on internal and external audit.
Internal vs. external audit
Auditing can be both internal and external.
Internal audit generally checks for operational efficiency while external audit examines the accuracy and validity of the financial statements.
Internal audit is carried out by the internal audit department of the company or an outsourcing firm, depending on the size of the company. Typically, only big multi-national companies (MNCs) have an internal audit department.
Evaluation of the internal control, accounting system and examining operational activities are tasks conducted during an internal audit. It is also a way to verify inventory and analyze the financial and non-financial statements and information. Internal audit is conducted to detect risks, errors and fraud.
For small and micro companies, why there is a need for professional services firm such as OA Assurance PAC to examine the company's financial statements through an external audit?
There are four major reasons:
1) To protect the interests of various stakeholders
An audit is like a clean bill of health; it tells your stakeholders if your company is healthy or sick. External audit protects and preserves the interests of stakeholders, which include investors, customers, suppliers and employees. The presence of an external organization, examining the financial statement of the company, is an objective examination that protects the interests of various stakeholders. This can build trust and confidence in the accuracy of the financial reports.
2) To establish accountability among leaders and drive the appropriate behavior
External auditing is a practice of transparency and accountability, which are hallmarks of good corporate governance. Accountability is about planning, doing, checking, and acting; external audit falls under checking. It is essential that even as a small or micro enterprise that you start a corporate culture of transparency and accountability so the company grows as an ethical organization composed of individuals driven by appropriate personal and professional behaviors.
3) To standardize processes across the organization and promote best practices
A standardized process will lead to higher quality data, faster delivery time and optimum sharing of resources and results to employees. During external audit, auditors check for the truthfulness of the company's financial statements. They make sure that accounting records are complete and that all material facts are disclosed. Standardizing the process lead to ease in compliance because there is a given process or system to be followed.
Promoting a culture of transparency is, in itself, a best practice that can be emulated from one department to another. On a greater scale, this best practice can be replicated from one company to another.
4) To fulfill requirements from banks and government agencies Small and micro enterprises need all the financial support it can get as their businesses continue to grow and thrive. When you apply for loans or grants, most organizations such as banks and government agencies will require an audit of your company to see where you are in your financial standing. This is essential so that these agencies will know that you are moving towards a healthy practice of being financially sound. An audit is also essential for companies which are subsidiaries to listed companies. Furthermore, all companies registered in Singapore are required to comply to the Singapore Financial Reporting Standards.
What can OA Assurance PAC do for you?
An auditor's presence in your company is a testament of transparency and accountability. As the auditor's report is also presented to stakeholders such as investors, trust is built when the report shows the financial statements being free from fraud or errors, factual and complied with financial reporting standards.
Public accountants registered under the Accounting and Corporate Regulatory Authority (ACRA) can be appointed as auditor of financial statements in Singapore. Public accountants are responsible for audit opinion, which should be in accordance with the Singapore Standards in Auditing.
At OA Assurance PAC, we provide our clients with the accounting services of audit, tax, accounting and corporate advisory, among others.
Our vast experience and knowledge in auditing enables our firm to make accurate and reliable judgements. The audit services we provide can access the stewardship of the directors and managers of the company to provide a true and fair opinion on the Company’s statements.
If you have any questions, our lines are open for a no-obligation discussion with you. Let’s explore a productive partnership together by reaching us at +65 6914 1111 or firstname.lastname@example.org.