Better Business
Issue Thirty Seven
This month:
What an audit means to you
Did you know?
What an audit means to you
There has been a large media focus upon the work of audit firms following the collapse of finance companies and investments firms since 2007. This article is about what an audit is and most importantly what an audit is not.
What an audit is:-
- An assurance that the financial statements as at balance date are free of material error, whether caused by fraud or error.
- Confirmation of whether or not the financial statements comply with Generally Accepted Accounting Practice.
- A statutory obligation where the company is soliciting investment funds from the public, or has an overseas body corporate as its owner.
What an audit is not:-
- A guarantee that the business will continue as a going concern into the future. The auditor does have access to inside information at the time or the audit, but does not have a crystal ball, or access to information relating to events which occurred after the audit report was signed.
- A promise that the organisation is free of fraud. The accounts can be materially correct and still conceal fraud.
- A certainty of there being no errors at all. Due to the large volume of information condensed down into individual lines in the financial statements, there may still be small undetected errors. But they should just be that, small.
- A substitute for the directors and managers of a company fulfilling their statutory obligations under the Companies Act 1993 and the Financial Reporting Act 1993.
What can i do to assist myself?
- If you are a Company Director or thinking being appointed to the position, read the Companies Act 1993 and the Financial Reporting Act 1993, they can both be downloaded free of charge from www.legislation.govt.nz. Seek advice when you are not sure about things.
- If you are about to be appointed as a director, make sure you understand the financial situation of the company and any risks its facing. Are you confident in your skills to deal with it? Are you able to get appropriate professional help? Are you capable of financing it or securing third party finance?
- When you are investing or loaning money, look beyond the financial statements of the company or organisation. The financial statements are snap shot of what the organisation looked like financial at balance date. Any number of things both good and bad may have happened subsequently, check the internet, and ask questions from those who are promoting the investment to you. Get external professional help, if you are unsure of your understanding.
Did you know?
Did you know that HWI also includes HWI Partnership, a fully operational audit firm, which can perform specific review assignments as well as full statutory audits? This means we can provide you with a full diagnostic audit services for your businesses internal control systems.
Did you know that if your business has material quantities of trading stock (inventory) on hand at balance date, the Income Tax Act 2007 required you to undertake a stock take? Our team of accountants regularly attend stock takes as part of our firms audit function.
