How does a financial statements audit work?

[yngmind]

Some countries, like Cyprus and Hong Kong, have mandatory financial audits.

How does it work exactly? Has anyone had any experience?

Will they check your Xero and how everything is reconciled, as well as the attached invoices?

I have found a PWC article about the financial audit - https://www.pwc.com/im/en/services/Assurance/pwc-understanding-financial-statement-audit.pdf

Kinda scary of audits, lol.

 

[daniels27]

Have you prepared your financial statements already?

In short yes, they check if statements are proper and if there are any obvious mistakes.

 

[yngmind]

Have you prepared your financial statements already?

In short yes, they check if statements are proper and if there are any obvious mistakes.

Yeah, my accountant did. So far, I haven't had any experience with the audit. I just avoided those countries with the audit requirements.

I think it's a good idea just to hire an auditor to check my statements.

 

[JohnLocke]

When it comes to audited financial statements that you're talking about, and they need to be carried out correctly where the auditor vouches for what's in the accounts, they review EVERYTHING concerning the company. If there's the slightest suspicion that something doesn't match or you're withholding information, you'll be asked to present it. If they still think you're withholding information, they will not create an audited financial statement, and you'll receive an auditor's remark. In certain countries, there are very strict rules for audited financial statements.

Therefore, they are also more credible, and for the same reason, in some countries, some banks will require audited financial statements before they grant, for example, a credit for a larger amount to the company.

At the same time, many auditors will not create audited financial statements if they have even the slightest suspicion that something is amiss in the company.

 

[yngmind]

When it comes to audited financial statements that you're talking about, and they need to be carried out correctly where the auditor vouches for what's in the accounts, they review EVERYTHING concerning the company. If there's the slightest suspicion that something doesn't match or you're withholding information, you'll be asked to present it. If they still think you're withholding information, they will not create an audited financial statement, and you'll receive an auditor's remark. In certain countries, there are very strict rules for audited financial statements.

Therefore, they are also more credible, and for the same reason, in some countries, some banks will require audited financial statements before they grant, for example, a credit for a larger amount to the company.

At the same time, many auditors will not create audited financial statements if they have even the slightest suspicion that something is amiss in the company.

It sounds scary, I'll be honest.

 

[JohnLocke]

That is only the case if you do not disclose everything about what the company owns, and you do not have complete control over your bookkeeping. If you have a handle on this, there is nothing to fear.

 

[Sols]

I think audits are great. They give you peace of mind. Even if you trust your accountants, it doesn't hurt to have a second opinion. As long as your accountants have done a good job and as long as you have good reporting available, the audit will be a smooth.

Audited financials are also something you can give to banks/PSPs/government as a very strong SOF/SOW documentation.

Everywhere I've done it, the cost of an audit has been a valid business expense, so it doesn't hurt your bottomline much.

Avoid Big Four (Deloitte, KPMG, PWC, EY) unless you have a very good reason to pay multiples of the normal cost of an audit just to have their name attached to your financials. An audit for a simple ecommerce business in Cyprus, Malta, or Hong Kong doesn't cost more than a few thousand EUR/USD in most cases.