What is the Objective of an External Audit and What Standards are Required?

Weigh the fairness of your financials
with an objective assessment by an
external auditor and gain credibility.

An audit is a systematic process of objectively obtaining and evaluating the accounts or financial records of a governmental, business, or other entity. Whereas some businesses rely on audits conducted by employees—these are called internal audits—others utilize external or independent auditors to handle this task (some businesses rely on both types of audits in some combination).

The primary objective of the external audit is to add credibility to the financial statements of the management.

The role of the external auditor is to render an independent professional opinion on the fairness of financial statements to the extent that is required by generally accepted auditing standards. External audits are often used by smaller businesses that do not have the resources or inclination to maintain internal audit systems.

The auditing process is based on standards, concepts, procedures, and reporting practices that are primarily imposed by the American Institute of Certified Public Accountants (AICPA). AICPA general standards and standards of field work declare that:

• External audits should be performed by a person or persons having adequate technical training and proficiency as an auditor.
• The auditor or auditors maintain complete independence in all matters relating to the assignment.
• The independent auditor or auditors should make sure that all aspects of the examination and the preparation of the audit report are carried out with a high standard of professionalism.
• The work is to be adequately planned and assistants, if any, are to be properly supervised.
• Independent auditors will carry out proper study and evaluation of the existing internal controls to determine their reliability and suitability for conducting all necessary auditing procedures.
• External auditors will make certain that they are able to review all relevant evidential materials, whether obtained through inspection, observation, inquiries, or confirmation, so that they can form an informed and reasonable opinion regarding the quality of the financial statements under examination.

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READ MORE>> referenceforbusiness.com: Audits, External- percentage, type, cost, Independent Auditing Standards

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The ABC's of an External Audit

A very wise step for any business is
to choose an external auditing team.

An audit is a systematic process
of objectively obtaining and evaluating the accounts or financial records of a governmental, business, or other entity. Whereas some businesses rely on audits conducted by employees—these are called internal audits—others utilize external or independent auditors to handle this task (some businesses rely on both types of audits in some combination). External auditors are authorized by law to examine and publicly issue an opinion on the reliability of corporate financial reports.

The business of external auditing
is to determine the extent to which the organization adheres to managerial policies, procedures, and requirements. The independent or external auditor is not an employee of the organization. He or she performs an examination and issues a report containing an opinion on a client's financial statements. During the course of an audit study, the external auditor also becomes well-acquainted with the virtues and flaws of the client's accounting procedures. As a result, the auditor's final report to management often includes recommendations on methodologies of improving internal controls that are in place.

The compliance audit,
the financial statements audit, and the operational audit are among the major types of audits conducted by external auditors. A compliance audit has as its objective the determination of whether an organization is following established procedures or rules. A financial statement audit (or attest audit) examines financial statements, records, and related operations to ascertain adherence to generally accepted accounting principles. An operational audit examines an organization's activities in order to assess performances and develop recommendations for improvements, or further action.

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READ MORE>> inc.com: "Audits, External" from Encyclopedia of Business Terms 

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GBC Tax LLC is GROWING! New Auditing and Payroll Branches Added!

We at GBC Tax will help
your small business grow too!

FOR IMMEDIATE RELEASE

GBC Services, LLC, is expanding their small business for all your accounting and HRMS needs in 2015.

GBC Tax has expanded its services to include auditing, IRS representation, HRMS, consulting and CFO services, and e-verification. We have added new websites and branches and also added some staff recently. Our staff is growing! Our senior staff accountant, Milad Jaberi, has now completed his CPA certification, and we have a new staff accountant, Amanda Gardner.

Amanda Gardner recently graduated from Kennesaw State University with a Bachelor of Business Administration in Accounting in May 2014. Amanda’s focus and passion include audit and business analysis, and she is currently pursuing her CPA Certification and Master's degree. When not at work, Amanda loves to spend time with her family and partake in arts and crafts.

Call GBC today for a free consultation and see how well-rounded, professional and comprehensive our services are first-hand! We can help you grow your small business also, protect you from potential IRS problems, and increase your profit margins! We are also fully equipped to handle the needs of larger corporations. Please visit our new payroll and auditing websites:

GBCPayrollServices.com
GBCAuditServices.com
GBCTax.com

GBC Tax, Payroll, and Audit Services, Certified Public Accountants is located at:
1950 North Park Place SE, Suite 150, Atlanta, GA 30339.
Telephone: 678-366-9232

For Media Inquiries:
Ghassan R. Gharaizi, Quickbooks ProAdvisor and Certified Public Accountant.

External Auditing Services and Solutions Offered to Atlanta Small Businesses

Protect your small business.

FOR IMMEDIATE RELEASE

GBC SERVICES, LLC NOW OFFERS EXPERT EXTERNAL AUDITING SERVICES FOR ATLANTA, GA.

Choose to protect your profit margins by having a professional audit service completed.  Keep your company on sound economic footing by utilizing an expert league of accounting professionals who know what the current governmental standards are. Call or contact GBC Audits today to learn how we may assist you in your quarterly and retirement plan auditing needs.

One cannot take for granted how vital it is for a company to observe regulatory fiscal reporting measures required by agencies like the IRS. The Internal Revenue Service is merely one federal department to worry about in this regard, however. The Department of Labor also has a number of reporting requirements, with documentation that must be filed annually, and sometimes electronically, which we take care of also. Providing essential reports to these governmental bodies is not a small task and can be difficult for one person or small team to oversee.

The GBC Audit team is lead by Quickbooks ProAdvisor Ghassan R. Gharaizi, an experienced CPA who takes a nuanced, multifaceted approach to financial planning and assessment. Not satisfied with cookie cutter business paradigms, Gharaizi works very hard to make sure the auditing solutions he proposes for your company are indeed tailored to fit your needs. This can be especially helpful for small businesses, which can have very different considerations than larger corporations. Likewise, a larger company’s accounting obligations will have a much broader scope. In both circumstances, auditing services will have to be adapted in order to apply the appropriate tools. GBC Audit Services of Atlanta's services are highly affordable, taking all manner of budget constraints into consideration.

GBC Audits of Atlanta provides pertinent Audit and Consulting Services that will assist you and your financial team whenever critical tax seasons or quarterly fiscal sessions arise.

GBC Services LLC, Certified Public Accountants and Auditing services is located at:
1950 North Park Place SE, Suite 150, Atlanta, GA 30339.
Telephone: 678-366-9232

GBCTax.com
GBCAuditServices.com
For Media Inquiries: Ghassan R. Gharaizi, Quickbooks ProAdvisor and Certified Public Accountant.

A Summary of What an External Audit Includes: Questions and Answers

Ensure the health of your business;
hire a professional external audit.

Q: What does the process of an external audit for your business entail?

A: Basically, an external audit occurs once a year and focuses on the company’s performance and compliance. Accounting records are commonly examined in an external audit to make sure no errors exist in the financial statement, which is important for investors and regulatory requirements.

External auditors have no affiliation with the company, which offers the company an unbiased examination.

Here are some of the most frequently asked questions:

• Q: What is a Typical Audit Time-Frame?
  
  A: An external audit does not have a standard length. The audit goes on until the external auditors have finished. Generally, an external audit begins at the end of the company’s fiscal year, since that is when the accounting books are closed and financial statements for the year are prepared. The external auditors may communicate with internal auditors when any questions arise during the process, but the external auditors are not influenced by the internal auditors.
  
• Q: Is There any Pre-Audit Planning Needed?
  
  A: Before the external auditor begins, certain activities must be completed. The auditor must meet with management of the company to determine if any internal changes in control, procedures or other factors have affected company record keeping and reporting. Such factors can include changes in industry regulations, legal matters or changes in company structure and operations.
  
• Q: What Goes on for the Duration of the Audit?
  
  A: The reporting phase is the main part of the external audit, which is done on site at the company being audited. In this phase, auditors examine the company’s ability to record and process data accurately in reports, such as in financial statements. This is done by going through the records used to create the statement, or other documents, and re-creating them to see if they were created correctly by the company. During this phase, the auditors may request additional files or documentation from the company’s internal auditors or ask questions about how conclusions were drawn.
  
• Q: What Outcome Should be Expected as a Result?
  
  A: At the end of the audit, the external auditors prepare and deliver a summary report to the company. The summary report details all of the findings from the audit. This includes discrepancies found in the reporting and non-compliance of rules and regulations. The auditor findings offer the company a way to correct any discrepancies and become compliant before a regulatory body notices.

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READ MORE>> smallbusiness.chron.com: What Does the Process of Performing an External Audit Include?

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Characteristics of An Effective External Audit for Your Business

Consider the contributions of the
managament and audit committee
in the audit assessment also.

An effective audit truly challenges and tests the contents of the financial statements in order to form an opinion on whether they present a true and fair view. An audit must, of course, comply with all relevant auditing and ethical standards as well.

An effective audit must also include:

• An audit process tailored to the risks facing the entity, the business structure and the regulatory environment.
• An audit team that is technically strong, perceptive, intellectually curious and independent-minded — bringing an informed professional skepticism to bear on management’s approach and assertions.
• An audit approach that is based on an understanding of the control environment, including the role of information technology in supporting the financial reporting process.
• An audit culture that seeks continuous improvement and increased quality.

Fundamentally, an effective audit must deliver the right audit opinion, in which shareholders will have confidence.

Two more important characteristics are:

1. Communications and reports to those charged with governance that reflect the audit team’s thought processes and rationale for conclusions. These should discuss management’s approach, alternatives considered, relevant comparators and a clear articulation of the final conclusion.
2. Effective interaction with management and the audit committee throughout its performance — everyone must understand what the ‘audit issues’ are, why they are ‘issues’ and how they will be resolved.

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READ MORE>> ey.com (Ernst & Young): Assessing the Effectiveness of the External Audit Process

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Making a Sound Decision in the Selection of an External Auditor

Planning to procure a quality
audit requires time and attention.

Regardless of the type or size of business you are affiliated with—from a small local shop to a large corporation, from a neighborhood health clinic to a major hospital, from a grade school to a university—

an effective audit can improve your operations and possibly yield significant dollar savings.

Selecting a qualified auditor will help you achieve the benefits of an effective audit and help you avoid wasting resources on auditors that aren’t likely to produce a quality audit. If your responsibilities include hiring an independent auditor, do some research first that can help you make a sound decision and get the most for your money.

Companies and public entities should select auditors only after considering the following five basic steps for an effective audit procurement process:

1. Planning—determining what needs to be done and when
2. Communicating Audit Requirements and Soliciting Proposals—writing a clear and direct solicitation document and disseminating it widely
3. Selecting a Qualified Auditor—authorizing a committee of knowledgeable persons to evaluate the ability of prospective auditors to effectively carry out the audit
4. Writing the Agreement: Documenting Expectations—documenting the expectations of both the entity and the auditor
5. Monitoring the Audit: Ensuring a Quality Audit—periodically reviewing the progress of the audit.

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READ MORE/GET COMPLETE GUIDE HERE>> doa.alaska.gov (Intergovernmental Audit Forum):  Choosing an External Auditor

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Why Should I Get an External Audit?

Quality external auditors will take
the time you don't have to go
through your records with a fine-
tooth comb. Protect your company.

Question: What IS an external audit?

External audits are independent, unbiased reviews of your business’s financial records. You usually can contract an accounting or auditing firm to conduct this review. It can be an expensive exercise, but it has its benefits. While you may consider your organization’s controls and records to be flawless, an external third-party review can assure you if that is actually the case.

Three main advantages are outlined as follows:

1. Identification of Errors: As a business owner, even if you have the expertise to conduct your own audits, the responsibilities of running a business may prevent you from dedicating the time required to seek out errors and omissions in your financial records. An external audit will identify these mistakes and rectify them over the historical data. This, in turn, will provide you with clearer business records and data.
   
2. Internal Control Effectiveness: External auditors perform walk-throughs of each of your business processes and verify that approvals and authority checks are in place and working before a transaction lands in your financial records. They also determine that your computer systems perform correctly. This doesn't cover IT functions, but entails a check for controls in your systems to ensure that only authorized personnel perform certain tasks. The external auditor will advise you on how to address any issues they uncover.
   
3. Acceptance of Audited Statements: You may require a loan for your small business or a letter of credit to obtain merchandise. Banks and lending companies typically will require that you provide audited and reliable financial statements. Your company's net assets adjusted for goodwill can help you anticipate its current value, which can help you set a price for it, if you are willing to sell it. Similarly, tax authorities may be more willing to place reliance on your calculations for income or sales taxes if you present audited financial statements.

Audited financial statements indicate that you are a responsible business owner who practices transparency in your activities.

These acts of transparency contribute to the goodwill of your business. This can all be used easily to settle accounts, diffuse disputes among partners, and to prevent employees from committing fraud. 

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READ MORE>> yourbusiness.azcentral.com: "What Are the Advantages of An External Audit?

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Purchasing an External Audit for Your Non-Profit Organization

Here is how to get the right help
for your nonprofit's finances.

Have you started a nonprofit organization recently? The paperwork can be complicated and lengthy sometimes. The solution to much of this is to hire an external auditor.

With the increasing need for accountability, more and more nonprofits are turning to audit services. 

The accepted method of soliciting bids for auditing services is through a Request for Proposals (RFP). When designing one, keep the following ideas in mind:

• Describe the organization thoroughly. What is your mission? When were you founded? Are you a 501(c)(3) or some other type of nonprofit? What are your services? Are there special circumstances the auditors should know about (e.g., this is the first financial audit after a merger)? It is not necessary to include a copy of audited financial statements at this stage - you can make them available during pre-proposal interviews - but do include summary financial information such as revenues and their sources and balance sheet data.
• State what you need. State explicitly what you need the auditing firm to do. Some nonprofits want their auditors to audit the financial statements, complete the tax return(s), and file various financial reports, while others want only the audited financials.
• Request qualifications. Request that the auditors describe their qualifications to audit your organization. Explicitly link your needs with their qualifications, such as "Must have experience performing OMB A-133 audits."
• Describe your timetable, decision process, and selection criteria. Detail how you will make your decision, when, and on what basis. A formula with points for various criteria is bureaucratic but probably harmless. Best to be straightforward here. Note: By all rights, the auditors report to the board, so they should be the ultimate decision makers even if staff does most of the work.
• Select the firms you will send the RFP to. As much as possible, send the RFP to practitioners and firms you know to be skilled in your industry and appropriate providers of service. Be prepared to meet with each candidate in person (if they don't request a personal visit, ask yourself why).
• Provide enough time for the audit firms to respond. Give plenty of time for all parties concerned to do their jobs - four to eight weeks should work - and plan to put in at least as much time managing the process as any single candidate will in responding to you. Use the process as a management tool.

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READ MORE>> nonprofit.about.com: How to Purchase Audit Services for Your Nonprofit

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Managing External Audit Relationships

An external auditor is key in going
over all the details of your records.

External auditors are certified professionals who check the accuracy and completeness of a business's financial statements. Managing the external audit relationship can be difficult for small business owners who must balance the auditor's requests for sensitive financial information, the need for company confidentiality as well as the choice of which auditor to engage.

Up-front communication is the hallmark of the selection process. Business owners should seek an auditor who is keen to discuss issues as they arise and who doesn't hide the risk of financial decisions from the company or its managers.

Once you have selected a compatible professional, keep these three points in mind to guide you through the rest of the process wisely:

1. Traits of a Good Relationship: The key traits that define a good relationship between the external auditor and the business executives can be summed up in three words: collaborative, congenial and communicative. This last trait is merely an extension of the open communication policy the auditor and business should adopt starting in the selection process. Collaborative and congenial mean both parties recognize their obligations to the auditing process. The business owner is willing to provide documents when requested by the auditor, in a reasonable format, and timing issues are discussed forthrightly. In return, the auditor is fair and keeps an open mind, assuming that errors point to mistakes rather than fraud unless there is strong evidence to think otherwise.
2. Consequences of a Bad Relationship: A breakdown in any of the three key traits can have serious repercussions for the business. In most jurisdictions, the law requires companies to hire an external or independent auditor, so any snag in that process may put the company at breach of law. Further, the audit opinion may be delayed, withheld or qualified if something goes wrong. A qualified opinion means the auditor can complete her job but finds that the company hasn't provided full and clear information or possibly has been subject to fraud or tax evasion. The business should try to avoid these consequences at all times, keeping the lines of communication open and setting clear goals and expectations during the engagement process.
3. Extending the Auditor's Engagement: Sometimes, the auditor or the company may not be able to complete the audit in the time frame that was arranged initially. In this instance, it is important for the scope of work to be clarified so as to extend the auditor's engagement, lengthening the amount of time it hires the auditor. A scope of work document should be drawn up at this point, specifying the balance of work to be completed, the amount of time for the contract extension and any procedural issues that need to be addressed. External audits normally take place every 12 months, so any external audit engagement lasting for more than a few weeks is likely to throw this schedule off track in the future.

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READ MORE>> smallbusiness.chron.com: How to Manage External Audit Relationships

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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• GBC Tax Offers Atlanta Experienced IRS Representation
• Essential Financial Services
• Tax Requirements By State
• Visit the Internal Revenue Service's Website
• GBC Audit Services