Strong financial health is the basis for any successful organisation. All businesses rely on financial records in order to develop effective strategies to grow their operations. These records are also essential for transparency: it’s every business’s responsibility to provide financial information to its stakeholders, such as employees, regulatory authorities, investors, and shareholders.
However, financial records are only valuable if they are precise, accurate, and comprehensive. There could be many reasons why a business provides misleading financial information, either on purpose or through incompetence. This is why financial audits conducted by an expert and independent third party are essential in the business world.
What is a Financial Audit?
A financial audit is conducted periodically to assess an organisation’s assets and ensure that its financial information is reported accurately and completely. Financial audits are typically conducted by independent experts called Financial Auditors with the primary purpose of assuring directors, regulators, debtors, and investors that the organisation’s financial statements are accurate.
It’s important to remember that financial audits are not absolute guarantees of accuracy. A financial audit involves a range of different processes, such as observation, interviews, tests, financial report analysis, and other controls designed to help financial auditors check the accuracy of financial statements. This provides a reasonable assurance that the records are honest and accurate, but it’s not an iron-clad guarantee.
The Role of a Financial Auditor
A financial auditor has a number of responsibilities. They play an important role in verifying that a company has provided a true and accurate view of the company’s financial position, and are usually charged with planning and conducting financial audits from start to finish.
Some of the key tasks performed by financial auditors include:
- Verifying documents, figures, and account details, such as tax returns, income statements, and cash flow data
- Providing financial control information by gathering, analyzing, and presenting trends and data
- Assessing risk by identifying the organization’s areas of non-compliance
- Assessing the internal controls implemented by management
- Presenting financial analysis to stakeholders
- Helping stakeholders and investors understand audit results, recommendations, and future projections
What are the Key Objectives of a Financial Audit?
In essence, the key objectives of a financial audit are:
- Detect and eliminate any errors
- Avoid over or undervaluation of the company’s stock
- Examine internal verification systems
- Confirm the existence and value of all represented assets and liabilities
- Verify the authenticity and validity of all transactions conducted
- Check the revenue of transactions and valuation of capital
A financial audit is designed not only to verify financial records, but on a larger scale, it adds value for the organisation. By providing a reasonable assurance of financial accuracy, it strengthens the company’s position and helps it to accomplish its financial objectives.
Audits can also facilitate a disciplined and systematic approach that allows an organisation to improve its risk management and governance.
What Types of Companies do Financial Auditors Work For?
Financial auditors often work for public accounting firms like KPMG, BDO, Grant Thornton, Deloitte, and PwC. These large, often multinational companies not only conduct financial auditing for their clients, but also offer a broad range of services from accounting and tax filing to consultancy. As a financial auditor working for a company like this, you may conduct audits for a wide range of private companies, charities, and other organisations.
Companies may also hire internal auditors, who are in-house employees that are typically responsible for assessing the company’s risk management systems. Internal auditors can help develop risk management strategies and make sure their policies are being implemented correctly.
Internal auditors usually work for large corporations, but may also be hired by government departments and agencies to either manage public funds or audit private companies to ensure compliance with government regulations.
What Training Do You Need to Work in Financial Auditing?
Obtaining a bachelor’s degree in a field like finance or accounting is the first step to becoming a financial auditor.
Completing a 5-year diploma such as EDHEC Online Master of Science in Corporate Finance can also be an asset and allow you to stand out from the competition.
Finally, to work as a financial auditor, you’ll usually also need a relevant certification such as a CPA, CIA, CISA, or CGAP.
How to Pursue a Career as a Financial Auditor?
Financial auditors possess a range of high-level analytical skills that allow them to accurately evaluate financial records. These qualified professionals understand how to assess evidence in order to make accurate assessments and recommendations.
Investors need a certain level of confidence to invest in any company and rely on independent financial audits. Likewise, governments can ask for audited records to ensure businesses are complying with all relevant regulations. Potential investors rely on financial audits to assess a company’s value. This means that it’s essential for businesses to ensure that their financial statements are accurate and reliable, and so they’ll always need financial auditors.