The activities of any enterprise require strict control in order to avoid mistakes and their negative consequences, as well as to identify economic crimes and persons associated with them. For this purpose, special checks are carried out - a mandatory and proactive audit. Knowing the essence of these concepts, what are their differences and what they represent in practice, will be useful not only to economists, accountants and financiers, but also simply to modern educated people.
Concept and essence
The word “audit” is used to mean verification of the economic, economic and financial activities of an enterprise by independent specialists who have undergone special training and are certified in the manner prescribed by applicable law, as well as state (federal) or international standards. There are several types of such expertise, the most common of which are two - mandatory and proactive. An audit conducted to comply with legal requirements is called mandatory. For example, such inspections should be carried out by joint-stock companies, professional participants in the financial or stock market, insurance companies, banks, etc. The results of this audit are sent to government bodies that oversee the activities of such firms. Things are completely different with proactive auditing. From its very name it follows that such a check is not mandatory, but is carried out exclusively at the request or internal necessity of the enterprise. The results of this audit are not sent anywhere, but are used by owners or managers to study and make appropriate decisions.
Initiators
The decision to conduct an optional audit may be made:
- For a joint-stock company - by shareholders, the supervisory board or the audit committee (these bodies are mandatory for such legal form of a legal entity), as well as the executive body (board of directors, board, etc.).
- For a limited liability company, a company with additional responsibility, a limited partnership, a private enterprise, etc. - owners, the supervisory board or the audit committee (if their election or appointment is provided for by internal documents). In addition, the decision can also be made by the executive body (director, manager, president of the company in accordance with the Charter of the legal entity).
- For an individual entrepreneur, the entrepreneur himself.
Dates and features
An initiative audit is usually carried out suddenly, that is, without warning interested parties (chief accountant, financial director, etc.) in order to avoid the substitution of documents or changes in information. Such a check does not last long, without violating the normal operation of the enterprise, except for the need for an inventory.
Initiative audit is undesirable to entrust the same company or company that advises the company in the course of business. This will help to identify errors and inaccuracies that occurred during the course of business and were missed by the auditor earlier by accident or intentionally, since a collusion between an accountant and an audit firm is infrequent, but still happens.
Subject of study
Since an initiative audit is carried out exclusively at will, the customer himself determines the objects of study. These may include:
- Correctness of accounting and tax accounting (preparation and accounting of primary documents, chart of accounts and postings, calculation of taxes and fees, etc.).
- Compliance of the terms of contracts and contracts with market conditions.
- The correctness of the preparation and submission of financial and other reporting to the fiscal service bodies and other government agencies that monitor the activities of the enterprise.
- Financial and economic indicators of the company (liquidity, financial independence, resistance to market fluctuations, etc.).
- Corporate governance (compliance with legislative requirements for the procedure for convening and holding meetings of shareholders or founders, for decision-making, etc.).
- An inventory of stocks and finished goods, money and other assets, as well as fixed assets.
- Validation of pricing.
When is it necessary to conduct?
An initiative audit of an enterprise is the work of highly paid specialists, therefore, enterprises do not conduct it on a regular basis, but only if necessary. Such verification may be necessary, for example, in the following cases:
- Before starting a scheduled inspection of fiscal authorities (tax service).
- To determine the value of the company with the intention of selling it.
- When planning to attract investment, as well as obtaining a large loan or loan.
- For making important business decisions related to the financial and economic condition of the enterprise.
- If there are suspicions regarding the activities of the chief accountant or director, as well as with the intention to change the persons holding these positions.
Verification Results
The conduct of an initiative audit gives owners and managers of the enterprise the opportunity to monitor the work of accounting, economists and financiers, as well as evaluate the performance of the entire company. In addition, experts will give recommendations on how to eliminate mistakes and inaccuracies, as well as suggest how to avoid this in the future. According to the results of the audit, the auditor can also help in making the right decisions both on large transactions of the enterprise itself, and on the intentions of the owners to sell it, and mergers or acquisitions.
Auditor Report
An initiative audit is completed by transmitting to the customer a full report, which is called the “Auditor's Report”. This document must contain:
- Description of the verification object. For example, the annual financial statements, the accuracy of accounting, the accuracy of accounting for stocks and finished products, etc.
- The period of the audit, as well as the time interval covered.
- Normative documents that were used in the work of the auditor.
- The calculation of the coefficients.
- Conclusions and recommendations.
- Full information about the auditor, data of his state registration and certification.
The conclusion is necessarily stitched, signed and certified with a seal. The auditor is responsible for the results of the audit and conclusions, therefore this document can be used in court if necessary, but only if the customer and the auditor are not related parties.
