I outlined in another post how I'd taken over as a book keeper in our company.
Just a few questions regarding the end of year. We keep our own books and then at the end of the year an accountant/auditor comes in. What will he need from me, I gather that I as the book keeper will not be creating the balance sheet and P+L statements, right?. Do I just close the accountants for the year, create the trial balance make sure its all ok and then he/she makes the financial statement?
I know this sounds proper pony (which it is) but we are based in the M.E where there are no obligations and submitting financial statements to the government is optional ( we have in the past to aid with getting finance for projects)
the production of the accounts isn't so bad but a statutory audit can be a little stressful.
The accountant will tell you exactly what information that they need from you but in general terms you should be able to give them a trial balance, justify every amount therein and be able to access all original documents quickly so everything need to be properly filed and correctly categorised.
Production of accounts is not normally that big an issue (compared to stautory audit) as it is the management of the firm, not the accountant that is responsible for the contents of the financial statements (the engagement letter will state that).
Audit on the other hand is a different kettle of fish in that an auditor will approach the engagement with a high level of professional scepticism assuming that error or fraud may exist within the financial statements (The old days of watchdogs vs bloodhounds from the Kingston cotton mill case seem long gone and the new approach is always (supposed to be) one of presumptive doubt).
For a statutory audit the accountant and the auditor should not be the same person / team although in many regions of the world there is no reason why they cannot work for the same firm provided that the auditors and accountants are quite seperate and there is no risk of reviewing their own work.
An auditor will require unfetted access to any information that they deem necessary at the time that they ask for it which will involve them testing your data on a sample basis, testing your controls, Inspecting assets, observing you working, reperfroming calculations that the accountant made, confirming balances with third parties, expecting immediate unannounced cash counts of petty cash, etc.
The auditor then gives an opinion as to whether the financial statements in all material respects give a true and fair view of your businesses affairs as at the balance sheet date.
From your perspective just prepare everything as you should through to trial balance, and have everything to hand that you may be asked for and everything will be fine.
Of course, you are in a different jurisdiction to ourselves. My answer uses International Audit standards and IFAC code of practice as its basis but there are still some countries where for non international companies local regulation will suffice.
If filing of accounts is not neccessary I assume that the audit is actually a requirement of the financial institutions? That would make sense as no bank is going to loan money without properly structured financial reporting and without proper statute the banks basically become the statute.
Interesting posts that just made me think about the importance of audit and how it must work in jurisdictions that have lax regulation,
thanks for posting this one,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The thing about the M.E (except maybe Dubai) is a proper, structured approach like you outlined would never happen in this part of the world, it goes against their insistence of chaos in every part of daily life.
This process and others that the western world will be done in a half arsed manner as a token gesture really.
An independent auditor will be paid to basically sign off on what I give (once its semi correct).
Saying this, I still want to produce the most accurate and beneficial financial information as possible.
Click on any of the countries and it gives you further details o fthe adoption.
For example, against United Arab Emirates it states :
According to a 2007 IMF report, the Dubai Financial Services Authority (DFSA) requires financial statements to be audited by a professional auditor, using ISAs, standards of the Accounting and Auditing Organization for Islamic Financial Institutions, or other audit standards recognized by the DFSA.
For Saudi it says :
Saudi Organization for Certified Public Accountants' (SOCPA) Auditing Standards Committee is responsible for setting auditing standards. The Committee follows a due process in setting Saudi auditing standards, taking into consideration local circumstances, ISAs, and US standards. In its Part 2 response, SOCPA indicates that it compares national standards with the international requirements to eliminate differences, where possible. In matters not covered by auditing standards or professional opinions issued by SOCPA, relevant ISAs are considered as generally accepted standards.
Of course, as you say. What happens on the ground in some area of the world and what happens in the ivory towers of the standard setting bodies may be a long way appart which may be why some banks impose a big 4 loan covenant where unless the audit is by a big 4 firm (which must adhere to the ISA's OR local regulation only where such are more stringent) then its basically disregarded by the financial institution as not worth the paper its written on.
Funny old world init!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
