- What is Financial Statement Audit?
- Why do businesses have to audit financial statements?
Auditing financial statements may be a familiar content and term, but not all businesses know the benefits of auditing and taking advantage of audits in business administration.
What is Financial Statement Audit? #
According to Articles 3 and 29, the 2015 Law on Accounting stipulates:
“Article 3. Interpretation of terms
Financial statement is an economic and financial information system of an accounting unit, which is presented according to the form specified in accounting standards and accounting regime.
“Article 29. Financial statements of accounting units
The financial statements of an accounting unit are used to summarize and explain the financial position and operating results of the accounting unit. The financial statements of an accounting unit include:
a) Report on financial situation;
b) Report on operation results;
c) Cash flow statement;
d) Notes to financial statements;
d) Other reports as prescribed by law.”
Accordingly, the financial statements include reports on the position of assets, equity and liabilities as well as the financial position and business results in the period of the enterprise. In other words, financial accounting statements are a means of presenting the profitability and financial status of an enterprise to interested parties (business owners, investors, lenders, tax authorities and other relevant agencies). function, …).
Why do businesses have to audit financial statements? #
Because they are subject to mandatory audit of financial statements #
Most businesses audit financial statements because they are subject to audits in accordance with the Law on Auditing and because they have to submit audited financial statements to regulatory agencies. Because, businesses often focus their attention on the targets of increasing revenue and reducing costs, maximizing profits, so they have not paid attention to the overall picture of their financial statements. The audit of financial statements is only for the purpose of complying with the provisions of the law, but has not been applied to enterprise management, and has not yet fully exploited the audit benefits.
Because I want to evaluate financial data objectively #
Contrary to the businesses that only audit because it is mandatory and do not use financial statements for management purposes, there are businesses that want through an audit to help them evaluate their financial statements objectively. . These businesses are more and more, including those that are required and not required to be audited. Owners of these businesses as well as business leaders understand the financial statements well, so they understand that the audit will objectively evaluate the financial statements. Since then, they have made changes in the way they manage their business, in order to achieve better financial results, a comprehensive report instead of just for tax purposes, as well as to limit risks in terms of money. finance - accounting - tax.
Because the mindset of business performance management has changed #
Business owners must constantly adapt to the changes of society, of consumer tastes, of the economy. These changes are faster and faster, requiring business owners and managers to make decisions quickly and accurately. And the basis for making these decisions is the need to have certified financial statements for their truthfulness and reasonableness, as well as an accounting system that continuously provides data in a timely manner.
For the purpose of merger, investment, receiving capital contribution #
Demand for mergers and acquisitions (M&A), calling for capital, pouring investment capital is increasingly widespread. Vietnam is becoming a market to attract large investment capital from outside based on the strong growth momentum of mature enterprises. In addition, the good effect of starting a business with many new and potential business ideas also provides a channel to attract investment capital from both domestic and foreign investment funds. Thereby showing that, when businesses face the decision of M&A, or call for capital, the first thing they need is a transparent and reliable financial report. And having financial statements to achieve these factors is through regular audits, timely overcoming internal control problems, building a strong financial and accounting apparatus.
Benefits of auditing financial statements #
- Helping businesses comply with the law, comply with regulations on the mandatory audit and submission of audited financial statements.
- Auditing financial statements helps businesses see and understand how third parties will evaluate the preparation and presentation of their financial statements. Thereby, the enterprise reviews whether the information presented in the current financial statements is really true in nature or not. Whether there is any information or data presentation that is not appropriate that could mislead readers of the financial statements.
- Transparency and clarity of information in financial statements have made financial statements a tool to help improve the reputation of enterprises in the market. A financial report with full information, properly presented always brings peace of mind and confidence of the report readers and investors.
- Auditing financial statements, in addition to the above purposes, also helps businesses review the gaps in their internal control and financial accounting. Based on that, enterprises promptly make adjustments, overcome and change the working process in order to reduce risks and errors and achieve better efficiency.
- The greatest value that an audit of financial statements brings is the timeliness of the business. Timely detect material errors, promptly advise to correct them, and promptly make adjustments. From there, enterprises promptly have transparent financial reports, timely grasp the actual business situation, promptly provide information to investors, have a basis to make timely decisions, etc.
With the rapid change in everything, from technology, from the type of business to the way of doing business, it is also necessary for businesses to build a correct and standard view of the need for financial statements to be prepared and maintained. clearly presented, in compliance with current regulations. And to achieve this, auditing financial statements is the fastest and most reliable way. For any issues that need support and advice, please contact the EXPERTIS Consulting Department for answers.