A company audit is an independent examination by qualified accountants of a company’s financial statements including its balance sheet, profit and loss account, supporting notes, director’s report and other documents as applicable to that particular entity.
The purpose of a company audit is for the auditors to report to the shareholders on the accuracy of the company accounts which are presented to them by the directors. Medium Companies or large companies as defined by the Companies Act are required to have their company accounts audited.
Small Companies as defined by the Companies Act are not required to have a company audit this is largely in recognition that for most small companies, the directors and the shareholders are one and the same people. If small companies were required to have a company audit you would end up in a situation where a company audit was required on a set of financial statements prepared by a director and the company auditor would have to report his audit opinion to the same director because he is also the shareholder. Having a company audit in this situation is seen as an unnecessary additional expense and therefore small companies are not required to have a company audit. It is typical were small companies have unconnected people who are shareholders and directors for the articles to require a company audit or if a lender or the bank require an audit.
The audit report will contain several distinct sections including the accounting standards used for the basis of assessment during the company audit, a synopsis of the scope of their work during the company audit.
The audit report will then present a conclusion of whether the evidence gathered during the company audit supports the opinion that the company accounts show a true and fair view of the actual activities engaged in during the period under consideration.
A further section within the audit report would highlight any significant discrepancies between the auditor’s and director’s view of the limited company accounts and details such differences for the reader to make an informed assessment.
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