There are various core components of a financial audit program. First, an understanding of a financial audit:
- A financial audit is a regular exercise carried out by qualified professionals from within or outside, to check the financial health of an organization
- It involves having to verify, examine and analyze the various data pertaining to the organization’s finance, such as financial records and financial statements
- This exercise is carried out to assess the company’s financial status, its profit and loss, growth prospects, investments needed to achieve those prospects, and most importantly, compliance with prescribed regulatory requirements.
Components of a financial audit program
Components of a financial audit program can be described in a number of ways. While on the one hand, components of a financial audit program could include the exact processes and steps that financial experts take to carry out the financial audit; on the other, components of a financial audit program can include those steps and processes that companies have to implement in order to ensure the smooth conduct of a financial audit.
So, components of a financial audit program could include at least two different, but related areas. In the first of these, the financial expert(s) look into many records, primarily these:
- The profit and loss statements;
- Balance sheet.
One of the core components of a financial audit program is the profit and loss statement, which reflects how the company is placed financially. A good financial expert can discern the exact health of the company by analyzing the profit and loss statement.
A balance sheet constitutes another of the components of a financial audit program, as it is in this that the financial activities of the company for a fixed period of time -usually a financial year -are measured and assessed.
Other components of a financial audit program
Among other components of a financial audit program; it is important for companies to know how to conduct itself during an audit. This is all the more important during external audits. The company has to comply with regulatory requirements to ensure that it supplies all the records and data that the independent auditor may ask. Failing to provide them, or proof of fudging of accounts is a serious offence and can attract major penalties. So, it is crucial for companies to keep note of the components of a financial audit program, so that it stays compliant and maintains a name in the industry.