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Financial Audit: Definition, Objectives, Benefits, and Stages

financial audit


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You need to know, if one aspect to fulfill company accountability is financial statements. This report must have passed a financial audit.

Because, later it will be reported to the government, investors, creditors, and so on. Of course, financial reports must be truly valid and reliable.

Therefore, the examination must be carried out thoroughly and precisely on the financial statements so that they meet the accounting standards and regulations applicable in Indonesia.

The examination is carried out by means of a financial audit in the form of collecting and evaluating evidence to provide confidence to report users in making decisions.

So, what is a financial audit? Here we provide an explanation along with the purpose, benefits, and process of doing it.

Let's see the discussion until the end!

What is a Financial Audit?

financial audit
Financial Audit Example (Unplash)

A financial audit is a third party opinion on financial statements from the results of an assessment or evaluation of an entity, be it an organization, institution, or company.

In short, a financial audit is the process of examining an entity's financial statements whether or not they have been presented in accordance with accounting principles.

If there are errors and are not in accordance with the rules, then the report must be corrected immediately so that the company's financial system can return to health and in accordance with applicable regulations.

Therefore, report audit for financial statements must be accurate, complete, and in accordance with the accounting rules applicable in Indonesia.

In this case, an auditor has a very important role. Because, auditors is a party that conducts an examination or evaluation of the financial statements of a particular company or entity.

Moreover, auditors are directly involved in the audit process, starting from the planning process, implementation, to report preparation.

If audits are not carried out, then intentional or unintentional errors will occur in the future. This makes the results of the report less credible and valid, so that the auditors will not be able to recognize the errors. stakeholder tidak akan percaya.

An example of a financial statement audit is a company's balance sheet for a certain period, for example, the last 5 years. This balance sheet includes several components, such as the total amount of assets, liabilities, and equity.

In addition, the next example of a financial statement audit is the profit and loss for the last 5 years which includes the company's profits and losses.

Meanwhile, the purpose of a financial audit is to ensure that the reports that have been prepared and presented by the company are accurate, valid, and in accordance with applicable accounting rules.

Benefits of a Financial Audit

Conducting a financial statement audit should not be underestimated. This is because this process has various benefits for an entity, be it an organization, institution, or company.

Therefore, the benefits of a financial audit are as follows:

1. Monitoring the financial system

The first benefit is that it can be used to monitor the financial system over a certain period. This is because an auditor does not only audit the report, but also monitors the financial system.

The goal is that in the event of a crime, such as corruption, the auditor can provide a written report on the problem to the authorities.

2. Maintain compliance

In the audit report process, an auditor will check whether the company has complied with all applicable laws and regulations, especially regarding accounting rules.

If found in violation of the rules, the auditor can provide a report to the authorities and the company.

3. Reports become more accurate

Furthermore, the benefit of a financial statement audit is to help check the level of accuracy of financial statements. In this case, of course, the company's financial statements become more accurate because they have been examined and evaluated.

Because, sometimes there are mistakes in the process of writing reports or fraud by irresponsible people. Therefore, the auditor is tasked with finding these criminal acts.

4. Achieving financial goals

The audit process also helps achieve the company's financial goals. This is because, if there is an error in the inspection process, the auditor can provide advice to fix it immediately.

Through these improvements, it can be one of the foundations for running a better financial system in the next period.

5. Detect fraud

Finally, the benefit of a financial statement audit is to detect fraud that occurs in the company. It is not impossible, if your company has irresponsible people.

Therefore, the purpose of conducting an audit is to find out the fraud. Because, an auditor will always report any problems found to the company or the authorities.

Financial Audit Stages

Now that you know about the definition and benefits, it's time to understand the stages of a financial statement audit.

The following stages or financial audit process are carried out:

1. Create an audit plan and approach

First, the audit plan and approach should take into account 2 things, namely:

a. Audit evidence collected must be competent.

b. The cost of collecting evidence should be minimal.

2. Carry out control and substantive tests

The second stage is to conduct control and substantive tests. The control test means that the auditor is required to carry out an assessment or evaluation of the company's transaction information.

Meanwhile, the substantive test is to verify and compare the monetary value with the transactions that have been carried out by the company.

3. Implementation of balance analysis and breakdown

Next, the financial audit process is to carry out implementation analysis and balance breakdown. In this case, the implementation of analysis means to check the report as well as to compare the balance with the available data objectively.

Meanwhile, the detailed balance test means testing various accounts in the financial statements in accordance with applicable standards.

4. Complete the audit process and issue a report

The final stage is to connect all the information that has been obtained to get an overall conclusion, so that the report can be presented fairly.

Because, a fair report is an important element for the company. Moreover, this result is obtained for the professionalism of auditors in carrying out the audit process.

Well, that's a complete discussion of what a financial audit is along with its benefits and stages. In essence, a financial audit is an evaluation process of a company that produces a third-person opinion on financial statements.

In this case, the audit of financial statements is one of the most important aspects because it relates to the company's financial condition and management performance.

The ways you can conduct a financial audit are by collecting documents, looking at accounting books, reviewing internal control policies, and looking at tax records.

All of this is done so that the audit process can be credible and valid, so that it can help drive your business growth.

However, the audit process cannot be done by just anyone because it is closely related to the company's financial condition. 

However, you don't have to worry about auditing your company's financial statements as it is readily available. Internal Audit Software from Audithink which offers easy audit planning, monitoring real timeto the efficiency of running it.

If you are interested in using it, you can immediately Audithink app demo to simplify the process and save time on company audits!

Guaranteed, your company's audit process will be more valid, relevant, reasonable, and in accordance with certain accounting rules and regulations.

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