You’ve probably heard of an audit before, but do you really know what audits in companies are?
Companies have to comply with certain procedures by law, so an audit is a procedure that helps them to ensure that their activities are carried out correctly.
What are company audits like?
An accounting audit is a review of a company’s accounts with the aim of accrediting and verifying that the company’s accounts reflect a true and fair view of the company and that the accounts are correct and error-free.
Likewise, companies can know the state of their company and its economic situation, proposing strategies or steps to follow to improve and avoid risks; trusting the accounting information and giving credibility to the company’s accounts.
An audit can be carried out both internally and externally:
- An internal audit is carried out by the company and seeks to check and guarantee the quality of an organisation’s accounting information in order to avoid errors and fraud with the Tax Agency, thus showing a true and fair view of the company.
- An external audit has the same objective as an attempt, but certain companies are required by law to be audited externally by an independent auditor.
After reviewing the accounts and annual accounts, a detailed report on the current situation of the company is issued to the management for subsequent decision making.
Objectives of an audit
An audit can be carried out for many reasons, as the audit process provides details of areas for improvement or problems that need to be solved. By carrying out an audit, the company avoids losses, as the accounting data is reviewed and misuse or fraud can be avoided or corrected.
In addition, it conveys confidence and transparency by verifying and controlling the business activity. It improves the planning and productivity of the company by improving the use of resources and identifying financial opportunities and threats or errors in order to create and develop strategies and objectives to be followed.
When is a company obliged to carry out an accounting audit?
Auditors are professionals who are responsible for verifying and collecting detailed accounting information in a report on the financial status of the company. This is a document that must be issued by the auditor in a standardised format established by the Spanish Accounting and Auditing Institute (ICAC) and the international standards contained in the International Standard on Auditing 700 (ISA 700).
Normally a company is required to have an accounting audit when it meets two of the following conditions for two consecutive financial years:
- Turnover of < €5.7 million.
- Total assets of < 2.8 million euros.
- More than 50 employees during the financial year.
Other reasons for auditing a company:
It is also very important to take into account when a company is obliged to carry out an accounting audit, as failure to do so may lead to fines or the closure of the Commercial Register.
These are other reasons why a company decides to have an audit:
- Voluntary: To carry out an audit with the aim of seeking transparency, reliability and fronts to confront. Mainly to gain a more detailed and in-depth knowledge of the company and its activity.
- Legal reasons: listed companies, public offer issuers, financial intermediation companies and some branches of insurance.
- Shareholders’ participation: public limited companies or limited liability companies in which the shareholders have a shareholding of more than 5%.
- Application for subsidies: in order to receive a subsidy, it may be compulsory to undergo an accounting audit.
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