When it comes to validating the financial information about your business, Third Party audit firms play a crucial role. Potential investors as well as lenders prefer reviewing financial statements audited by external professionals before establishing corporate relations with your firm. If the potential clients, lenders and investors find any anomalies in the audited statements or notice that the auditors failed to point out any solid misstatements, it certainly creates a negative impression in the eyes of the world. It is for this reason why accounting bodies have established certain standards and expectations, which define the roles and responsibilities of external audit firms, and set ground rules regarding how auditing must be done.
Judging Financial Statements
Some companies form an opinion that Third Party audit firms are responsible for creating business financial statements, which is in fact the job of firms providing accounting services. The auditors are mainly responsible for providing evenhanded affirmation that there aren’t any material misstatements and issues in the financial statements, and are made while following the accounting standards. They are there to just test financial data, sufficient enough to offer reasonable assurance to the companies.
Understanding the Business and its Operations
Though accounting services just concentrate on crunching numbers, auditing is more about recognizing the number statements which are not present in the vacuum. Auditors are determined to obtain a thorough understanding of the client’s business, its operations, its internal controls, and its overall environment, for which they perform a complete risk assessment of your business. They examine the digital account system for ensuring the data is protected and not being compromised, and will compare the results with other companies in the same business for spotting irregularities, if any.
Mining Opinion Effecting Evidence
External auditors normally base a major portion of their judgement on the evidence that they collect and examine while auditing the accounts. Once the business is rated on the risk chart, auditors ensure to collect sufficient evidence to study and form their opinion. The greater the risk rating of a client, the more quality evidence must be collected before presenting an opinion. Third party sources, like banks, investors and lenders may also be contacted for obtaining reliable information.
On the whole, it is on the basis of these roles and responsibilities that the external auditing firms base their working criteria and judge the accuracy and reliability of the company’s financial statements.