An audit company that has been asked to perform an external audit for an entity must first understand the nature of the entity. This entails coming to terms with the manner in which the entity runs their business, the processes and controls the entity has in place and the general day to day activities of business. This information assists audit companies understand the financials and bookkeeping records of the entity. An entity about to have an external audit should prepare the necessary information for an audit company beforehand.
An organisation cannot simply sit back and allow their financial statements to pile up, be incomplete or lack evidence to substantiate the amounts spent, invested or saved. Audit companies are not there to offer bookkeeping services when contracted to do an external audit. It is the organisation’s responsibility to ensure the financial statements are complete, accurate and up to date.
When the financial information of an organisation undergoing an external audit is not in place, the entity may actually be wasting their money as well as the time of the audit company. Ideally organisations should employ an internal bookkeeper or subcontract an accounting company to create the financial statements for the organisation. The person or persons responsible for compiling the financial statements need to have a sound knowledge of GAAP. The financial statements need to be prepared in such a manner that an individual with general accounting knowledge can easily read the statements accurately.
An external auditing company is merely contracted to validate the financial statements presented to them, not to create the financial statements for the entity. This essentially means inspecting the control over the financial systems which should already be in place. An external audit needs to verify that the posting of accounts, creating inquiries as well as the accuracy of the assets stated to name a few are accurate, truthful and authenticated.