An External Audit is a periodic audit conducted by an independent qualified auditor with the aim to determine whether the accounting records for a business are complete and accurate. It is also done to ensure that the statements accurately represent the organisation’s financial position and are prepared in accordance to the set laws.
Appointment: The process starts by appointing an independent auditor. Shareholders are usually the ones who choose and appoint auditors at the Annual General Meeting. Typically, auditors will be chosen based on their reputation, qualifications, and skills.
Acceptance : The next step of the process is the terms of engagement. In this part, the auditor confirms that he or she has accepted the appointment. He or she will be informed of the scope of the audit plus his or her expected responsibilities throughout the contract.
Audit Program: This is where the actual external auditing will take place. The auditor will collect, assess, and interpret data to gain understanding of the organisation’s activities. For each major activity listed in the financial statements, external auditors will have to identify and assess risks that may have significant impact on the organisation’s performance or financial position.
Evidence Gathering: External auditors will obtain evidence in order to successfully satisfy the requirements of the audit program. This may include confirming compliance with accounting policies, examining accounting records, and verifying assets that the organisation has purchased.
Reporting: After a thorough investigation, the auditors will submit a financial report and state their objective opinion. The scope of the audit and the outcome will be outlined in their report.