General Documents Required to Conduct an External Audit
The objective of a statutory audit is to ascertain whether an entity presents a just and precise depiction of its financial status by scrutinizing data such as bank balances bookkeeping records and financial transactions.
The external auditing process entails a comprehensive examination and assessment of a company's financial records by an autonomous accountant or external auditor. This procedure is imperative to ascertain the fairness and accuracy of a company's financial statements, taking into account its financial position and earnings.
Documents Required for External Audit
- Trial Balance and Ledgers
- The trial balance is the starting point which lists down all the assets, liabilities, income, and expenses of the entity during the year.
- The auditor can understand the financial statements from the trial balance provided and ensure the final values mentioned on the financial statements match the trial balance.
- The ledgers will help the auditor to understand the transactions that the entity has undertaken during the year. Apart from that he/she can select the samples required for further verification from here.
- Legal Documents :
- All legal documents will have to be provided to the auditor. These would generally include the following: -
- Trade License Copy
- Memorandum of Association
- Articles of Association
- Shareholders and their Shareholding
- Share Certificates
- TRN Certificate
- Fixed Assets
- A fixed assets register needs to be requested from the client.
- The fixed assets register will help the auditor recalculate depreciation to ensure it is as per the Company’s policy.
- Samples of invoices can be requested to verify the additions to plants and machinery during the year.
- Receivables and Payables
- The auditor would request the aging report for receivables and payables from the entity.
- Samples of receivables and payables will be asked to confirm their balances at year-end directly to the auditor – External confirmations
- Subsequent collections and payments after year-end will be verified from the bank statements after the year-end.
- Bank balances and Cash
- Bank statements and Bank confirmations can be requested to ensure the bank balances have been recorded accurately.
- Cash balance confirmation as of year-end needs to be taken from the management.
- Loans
- All loan documents need to be provided to the auditor.
- This will help to ensure the loan has been accurately bifurcated into current and non-current portions and recorded.
- Payroll
- Request the payroll sheet to ensure the salaries, overtime, gratuity, etc. have been accurately recorded as payroll is the largest expense for most companies in the UAE.
- Apart from this, the payroll sheet will also show the number of employees and these can be verified with those working in the entity.
- Sales, Purchases, and Expenses
- Samples can be selected from the ledgers provided and supporting documents can be requested to verify the samples selected.
- Ensure that high amounts are selected as samples.
- Tax Documents
- Tax registration certificate
- Input VAT and Output VAT sheets showing transactions during the year
- Sample invoices to verify the Input and Output VAT
- VAT returns made during the year
- External Confirmations
- External confirmations from related parties to confirm balances as of year-end.
- Confirmations from Suppliers and Customers samples to confirm balances due to receive or pay as at year-end.
- Bank balance confirmations as of year-end
- Cash balance confirmation
- Schedules
- Request for Prepayments schedule, Accrual schedule
- Samples from the schedules to be selected – (e.g. Rent Contract, Trade License, etc.) to ensure the right amount is shown in the expenses and as prepayments.
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Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.