Frequently Asked Questions
Financial statement audit is an independent and systematic process where qualified auditors examine the accuracy and compliance of a company's financial statements with accounting standards. This process is crucial for enhancing the credibility of financial information, building investor and stakeholder trust, complying with legal requirements, identifying material misstatements (error or fraud), and improving the company's internal control system.
The main stages of financial statement audit are divided into three general phases: 1. Planning and Risk Assessment (including understanding the entity, evaluating internal control, and determining materiality). 2. Execution of Audit (including performing tests of controls and substantive procedures, and gathering evidence). 3. Reporting and Conclusion (including evaluating findings, forming an audit opinion, and preparing the report).
For a financial statement audit, a wide range of documents are required, including primary financial statements, trial balance, statutory books (journal and ledger), accounting documents and supporting evidence (invoices, contracts, receipts), bank reconciliation statements, payroll lists, asset and inventory lists, articles of association, minutes of meetings, and tax returns. Timely and complete provision of these documents to auditors helps increase the efficiency of the process.
External audit is performed by an external, completely independent entity, and its primary goal is to express an opinion on the financial statements for external stakeholders. In contrast, internal audit is carried out by internal staff of the organization, aiming to add value and improve the organization's operations by evaluating the effectiveness of risk management, control, and governance processes for use by management and the board. Both types of audits are complementary.
In Iran, financial statement audits are conducted based on Iran Auditing Standards, developed by the Iranian Auditing Organization. Adherence to these standards is mandatory for all independent auditors and is essential to ensure the quality and uniformity of audit services, enhance the comparability of financial statements, protect public interest, and provide a framework for professional auditor training.
