JB Accounting and Malaysia Accounting Services provide financial statement audit services to help Malaysia companies produce fair and truthful statements against required accounting framework and standards that reflect their financial position and performance. The financial statements reviewed include the income statement, cash flow statement, balance sheet, statement of change in equity, and also related notes to financial statements. Not just for fulfuling legal compliance, if required, such a technical review by an independent, external third party also helps stakeholders make informed economic decisions with regard to their investment.
Understanding the different stages in Financial Statement Audits will help business owners determine how well and reliably their Malaysia Accounting Services provider is preparing their annual audits and other necessary documents required for submission to the authorities.
Engagement and Planning
The essential terms and conditions, for example audit objective, audit scope, audit fee, reporting timeline, reporting requirement and respective responsibilities of the auditors and the company, need to be agreed upon between the two parties before any work commences. A pre-analytical review is typically conducted by the auditors to ascertain the degree of complexity of the job and whether their level of expertise and resources can handle it. The JB accounting or Malaysia accounting services provider also must be on the alert for any fraud or money laundering involvement on the part of its potential client. If suspicions are formed by auditors in the course of review, their risk assessment, nature and extent of audit procedures, and the evaluation of the effectiveness of the relevant internal controls and processes will change. The requirement of an independent external audit generally has a deterrent effect against fraud.
Then, auditors may plan the audit approach, allocation of resources and also acquiring a better understanding of the internal controls and the environment of the business being reviewed. Risks assessments in this phase should also be performed, so that possible risks of material misstatements of the financial statements may be identified.
Execution and Reporting
In this phase, accounts, areas, events or transactions relevant to the financial statements will be subject to detailed testing, an example of which would be an inspection of the clients’ inventories stored in their warehouse. Typically for execution, the auditors will adopt procedures like the analytical review, inspection, interview, observation, recalculation, reperformance, vouching, etc. As soon as the auditors complete the detailed testing in accordance to protocol, they will draw a conclusion based on the audit results, after which they will issue their audit opinion.
The audit opinion is the determining factor of the credibility of a company’s financial statements. The financial statements of the company are deemed true and fair if an unmodified opinion is issued. A qualified opinion indicates that the company did not prepare and present the financial statements correctly, but the misstatements are not pervasive. An adverse opinion, however, means that the financial statements of the company are misrepresented, misstated and do not accurately reflect its financial performance and health, i.e. pervasive and cannot be relied upon to make financial decisions. Adverse opinions are detrimental to companies in many different ways, as they imply some level of wrongdoing or unreliability. A Disclaimer of Opinion is issued when auditors are unable to obtain or access the audit evidence for individual items or in aggregation to support their testing, and the unavailable items can possibly be materially misstated and pervasive.