End of accounting year: understand the importance of an audit of the company’s accounts

An organization’s accounting records must reflect the reality of a business. For this reason, financial management must be concerned with keeping the numbers organized and coherent. To find out whether the notes were made properly, it is worth auditing the company’s accounts.

It is quite common at the end of the accounting year, as it is capable of demonstrating whether the accounting was carried out correctly, allowing the manager to know the real situation of the organization. In this way, the audit helps to prevent losses and contributes to business growth.

In this post, you will understand the importance of auditing the company’s accounts, especially at the end of the accounting year. Continue reading and check it out!

What is the fiscal year?

Before understanding the importance of accounting audits, it is interesting to know what the fiscal year is. This term is used to describe the period in which private or public entities must account for their accounts.

It lasts 12 months and is generally divided into 4 quarters to facilitate accountability. Furthermore, this division makes it possible to identify fluctuations in performance, payment flow and other activities, making the process more transparent for those involved.

The fiscal year coincides with the calendar. Therefore, it starts on January 1st and ends on December 31st. However, in other countries, the period may change. For example, in the US, it starts on October 1st of one year and ends on September 30th of the other year.

Therefore, at the end of the accounting year it is common to carry out a survey of all accounts to check the company’s situation and ensure compliance with obligations.

What is an accounting audit?

Now that you know what the fiscal year is, you should understand what the accounting audit is. This action is carried out by an auditor who can be internal or external. The professional is responsible for checking, analyzing and validating the company’s financial information.

In other words, it checks cash movements, record books, asset movements, tax collections and other accounts of the organization.

In this sense, the objective of the accounting audit is to determine the authenticity of the records and financial statements relating to movements that alter the company’s assets. For this reason, this process must be done regularly.

It is interesting to carry out the audit especially at the end of the accounting year. This way, it is possible to start the next year with your accounts in order, making it easier to create new records and organize documents.

What is the role of accounting audit?

After understanding what an accounting audit is, you must learn what it is for. Through it, it is possible to identify whether the company’s assets are compatible with the information verified in the audit.

This is because one of the main activities of this process consists of analyzing the data published in income statements and balance sheets. Thus, analysis is carried out to understand whether this information corresponds to that presented in the company’s financial records.

In the accounting audit, the organization’s internal processes can also be verified. For example, procedures related to the organization’s financial data flow. This way, it is possible to ensure that true documents are drawn up.

It is worth highlighting that any area of ​​the company that presents financial information, such as budgets or purchase of materials, for example, can be audited. Furthermore, the process can be used to redefine control and storage strategies for financial information.

What are the types of audits in accounting?

As you have seen, there are two types of accounting audit: internal and external. As each one plays an essential role for the company, it is important to understand more about them. The first is carried out by professionals from the company itself and must be done periodically.

Therefore, the responsibility of internal audit is to check whether the organization’s policy and regime are complied with. This analysis may involve one or more sectors of the company and even commercial partners and suppliers, for example.

The external audit is carried out by a company hired to verify the financial statements in relation to the company’s assets. In this way, it also evaluates the processes and the way they are documented.

The audit is also responsible for presenting reports with the results of the action and indicating the company’s critical points analyzed. This way, the company can correct and prevent problems related to its accounting area — such as errors in statements — and make improvements.

What are the benefits of auditing company accounts?

Now that you know what types of audits are, you should know the benefits of this action on your company’s accounts. Look!

Identification of flaws in finances

A company’s financial flow is monitored by reports , statements and other accounting processes. For this reason, it is subject to errors related to the calculation of finances.

Through the reports prepared by the audit, it is possible to change the internal processes that generate these problems, simply and quickly. This way, these errors can be prevented from causing negative impacts on business performance.

Improvement of internal controls

With the audit, the company can improve its internal controls. This is because it evaluates accounting processes in more depth, such as reports, statements and other documents.

Furthermore, the audit identifies the necessary changes in the investigation of these procedures so that they are adequate.

Adaptation to international standards

If the company’s intention is to open its doors to foreign investors, it is essential that it has accounting processes that comply with international standards. With the accounting audit, the organization has validated information and more organized documents.

This improves its image in the domestic and foreign markets, giving investors greater confidence in investing resources in the company.

Throughout this post, you have seen what the accounting year is and the importance of auditing in your company — especially at the end of each period. Therefore, be sure to apply this procedure in your organization to keep your accounts up to date and avoid losses to your business!