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Financial Audit

Financial Audit

A financial audit, or audit of financial statements, involves the systematic examination of the entity’s financial statements and disclosures by an independent auditor. Once the audit process is complete, the auditor issues an audit report containing an opinion regarding the fairness and accuracy of the information contained in the financial statements and disclosures. This report must be issue to the intended recipients of the financial statements, providing them with a degree of assurance as to the contents and presentation of the financial statements in-relation to the entity’s position.

Kingston & Knight financial audit services enable the entity to improve the credibility of its financial statements and disclosures relating to its performance. In Australia, all publicly-listed companies (and other entities in some cases) are required to engage an independent auditor to complete an audit of financial statements and deliver an auditor’s report to be submitted as part of the annual reporting process.

Prospective lenders may also require that an independent audit of financial statements be undertaken for the entity to secure a credit arrangement. Also, if an entity requests substantial trade credit from a supplier, the supplier may request that an independent audit of financials statements be undertaken first.

The role of the financial auditor is increasingly crucial as applicable accounting standards and reporting requirements become more complex. As well, ever-increasing corporate scrutiny is a feature of the modern world in which entity’s must operate. This has lead to a marked expansion in the function, and importance, of financial audit and assurance engagements in developed economies.

Audit Process

The audit process begins with the engagement of an independent auditor for the purpose of completing an audit of the entity’s financial statements and other relevant disclosures. Prior to audit work commencing, the auditor will submit in writing a statement outlining their responsibilities, independence requirements, and an agreement with the entity regarding the audit’s scope and nature.

Following this, the appointed auditor will commence audit planning and risk assessment activities to better understand the entity under audit and the environment it operates in. This information will then inform the scope of the audit, by allowing the auditor to assess what contents of the financial statements are most relevant with respect to the entity’s position, and most susceptible to the impact of identified risks.  The audit process then proceeds through internal controls testing, substantive procedures, and the provision of a signed auditor’s report.

Audit Procedures

The two primary audit procedures are internal controls testing and substantive procedures. When planning and risk assessment is complete, the financial auditor can narrow the scope of the remaining audit procedures in relation to information obtained. Two important audit procedures are the testing of internal controls followed by a range of substantive procedures which vary depending on the scope and nature of the audit.

Assessing the entity’s system of internal controls to determine their overall effectiveness and possible risk of contributing to errors in reporting. This procedure focuses on the internal control mechanisms that are of particular importance in financial reporting and disclosure processes, such as:

  • Proper authorisation
  • Segregation of duties
  • Safeguarding of assets

Internal controls are tested in a number of ways. An auditor will elect to use certain tests based on the findings of their planning and risk assessment activities. For example, a sample of relevant transactions may be tested to ascertain the effectiveness of internal controls in relation to these.

Substantive procedures include analysis and examination of key financial information in relation to the financial statements and disclosures submitted by the entity. This is the most broad and lengthy of the audit procedures, with a variety of work involved that requires a high degree of two-way communication between the entity and its appointed auditor.

Auditors Melbourne

The Kingston & Knight team of auditors Melbourne comprises independent audit professionals who are strictly compliant with the auditing standards and standards on assurance engagements. Complex and detailed financial audit requirements are catered for with our extensive experience as financial services professionals and auditing and assurance experts.

By choosing Kingston & Knight Audit, you are guaranteed a service delivered by assurance practitioners who understand their responsibility to the recipients of your financial statements and reflect this in their work as financial auditors. Our emphasis on clear communication and extensive planning and risk assessment activities ensure that your entity is aware of its obligations as well. This ensures that your financial audit is more than an assurance engagement aimed at the recipients of your financial statements and disclosures, it is an engagement that provides independent insight into the financial position and control processes that determine the health of your entity.

Whilst providing your stakeholders with an informed, independent opinion on whether the financial statements give a true and fair view, Kingston & Knight Audit obtains audit evidence and compiles documentary working papers that will provide management with tools for development.

More information regarding the scope of your financial audit and work to be completed by our auditors Melbourne can be obtained during a free telephone consultation with Kingston & Knight Audit. We encourage you to contact us for additional information about our financial audit services on 1800 283 471 or via email at audit@kingstonknight.com.au.