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FINANCIAL AUDITS

What is a Financial Audit?

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A financial audit is an independent examination of an organization's financial statements and related processes to ensure they accurately reflect the company’s financial position and performance. Conducted by an auditor, it’s typically done periodically and is often required by regulatory bodies, investors, or other stakeholders to verify the integrity of financial reporting.

Benefits of a Financial Audit:

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1. Increased Credibility:

  • Having an independent auditor verify the financial health of the organization gives internal & external stakeholders—like investors, creditors, and regulators—confidence in the accuracy of the reported financial information.

2. Improved Financial Transparency:

  • A financial audit ensures the company is not misrepresenting its financial statements, thereby improving transparency and trust among stakeholders.

3. Detection of Fraud and Errors:

  • Regular audits help identify discrepancies, fraud, and mismanagement early, reducing the risk of financial scandals or significant losses.

4. Compliance with Laws and Regulations:

  • Audits ensure that the company complies with relevant financial reporting standards, tax regulations, and other legal requirements, avoiding penalties or legal issues.

5. Operational Improvements:

  • Auditors often suggest improvements in internal controls, processes, and efficiency, which can lead to better overall financial management and risk mitigation.

Some Specific Client Needs:

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"How can I ensure my company is complying with relevant financial reporting standards, tax regulations, and other legal requirements, avoiding penalties or legal issues and costly mistakes?"

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"How can I have reasonable assurance that my company's financial statements & reports are free from material misstatements, errors &/or fraudulent activities?"

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"How can I improve my company's financial management including internal controls, risk management, governance and business processes affecting my company's financial health?"

Why Choose Us?

We are committed to driving tangible results for your business. With specialized &/or expert knowledge, skills, competence & experience in Financial Auditing, our proven track record and dedication to excellence make us the ideal partner for your business needs & requirements.

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Following are four (4) useful actual STAR Scenarios allowing us to provide clear, concise examples of our expertise, skills, competence & knowledge in action. It demonstrates our problem-solving abilities, highlights our strategic approach, and emphasizes the tangible outcomes of our work. By focusing on real results, we can effectively show you how we turn challenges into opportunities and drive success for our clients. Whether you're looking for increased profits, improved efficiency, risk management, internal controls & business processes, or innovative solutions, the STAR method helps you understand exactly how we deliver value.  You will see more of these as you continue to browse our services and get to know The CFBS Advantage.

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In these four (4) STAR Scenarios we demonstrated the following skills, among others: 

Risk Assessment Skills
Internal Controls Evaluation
Audit Planning & Execution
Sampling Techniques
Report Writing & Communication Skills
Teamwork Skills
Leadership Skills
Independence & Objectivity
Analytical & Critical Thinking
Attention to Details
Accounting Principles & Standards
Client Management
Project Management

STAR Scenario #1:
Financial Statements Audit of an International Shipping Group of Companies

SITUATION:

Need to conduct regular Financial Statement Audits of international shipping group of companies.

TASK:

Audit Financial Statements.

ACTION:

1) Performed analytical procedures to aid in determining high risk FS account/areas;
2) Performed process walk thru, substantive tests and test of controls;
3) Performed risk-control assessments;
4) Evaluated and communicated results.

RESULTS:

1) Uncovered annual tax savings of about P12M+ by applying recommendations in accounting and tax treatments;
2) Provided reasonable assurance on the company’s financial statements & transactions, among others.

STAR Scenario #2: Financial Statements Audit of a Nationwide Electronics Distribution Company

SITUATION:

Need to conduct regular Financial Statement Audits of nationwide electronics distribution company.

TASK:

Audit Financial Statements.

ACTION:

1) Performed analytical procedures to aid in determining high risk FS account/areas;
2) Performed process walk thru, substantive tests and test of controls;
3) Performed risk-control assessments;
4) Evaluated and communicated results.

RESULTS:

1) Uncovered causes of significant losses of about P100M+ of the distribution company over the years which was due to obsolescence of inventories.  Digging further, the obsolescence was caused by the President wherein he allowed dumping of inventories from principal foreign company.   This was a loyalty issue, since the President was hired coming from this principal foreign company.  This serves as a management lesson for the group of companies;
2) Provided reasonable assurance on the company’s financial statements and transactions, among others.

STAR Scenario #3:  Financial Statements Audit of an Import-Export Company of the Group

SITUATION:

Need to conduct regular Financial Statement Audits of an import-export company of a group of companies.

TASK:

Audit Financial Statements.

ACTION:

1) Performed analytical procedures to aid in determining high risk FS account/areas;
2) Performed process walk thru, substantive tests and test of controls;
3) Performed risk-control assessments;
4) Evaluated and communicated results.

RESULTS:

1) Financial analysis uncovered extravagant and luxurious appropriation of cash into fixed assets in a particular facility. This serves as another management lesson for the group of companies;
2) Provided reasonable assurance on the company’s financial statements and transactions, among others.

STAR Scenario #4:  Financial Statements Audit of a Professional IT Services Firm

SITUATION:

Client need Financial Statement assurance since client is experiencing significant doubts on it’s reliability and integrity.

TASK:

Conduct a Financial Audit of the client.

ACTION:

1) Performed analytical procedures to aid in determining high risk FS account/areas; 
2) Performed process walk thru, substantive tests and test of controls; 
3) Evaluated and communicated results.

RESULTS:

1) Provided reasonable assurance on the clients’ Financial Statements expressing appropriate opinion.

Key Features of a Financial Audit:
1. Objective:

  • To provide an independent opinion on the fairness, accuracy, and reliability of financial statements.

  • Ensure compliance with accounting standards and regulations (e.g., GAAP, IFRS globally, PFRS).

  • Identify any discrepancies, fraud, or financial misstatements in the records.

2. Scope:

  • The audit focuses on a company's financial statements, which include the balance sheet, income statement, cash flow statement, and statement of changes in equity.

  • It also examines supporting documentations like invoices, contracts, and internal controls to ensure that the financial records are based on accurate and truthful data.

3. Types of Financial Audits:

  • External Audit: Conducted by a third-party audit firm that is independent of the organization. They express an opinion on whether the financial statements are presented fairly and in compliance with the applicable financial reporting framework.

  • Internal Audit: Performed by an organization's internal audit team. This focuses more on internal controls and operational efficiency but may involve elements of financial statement accuracy.

  • Forensic Audit: Specifically conducted to detect fraud, financial mismanagement, or illegal activity, often triggered by suspicions of wrongdoing.

Steps Involved in Our Financial Audit:
  1. Planning & Risk Assessment:

    • Initial Meetings: The auditors meet with the company’s management to understand the business operations, its financial systems, and any potential areas of concern.

    • Risk Assessment: Auditors assess the level of risk associated with different areas of the financial statements, such as revenue recognition, cash flow, and inventory, based on historical data and any notable issues.

    • Audit Plan: The audit plan is developed, specifying the areas that will be tested, the procedures to follow, and the timeline.

  2. Collection of Evidence:

    • Testing Transactions: Auditors will test a sample of transactions, reviewing invoices, bank statements, and contracts to ensure they are accurately reflected in the financial statements.

    • Verification of Balances: Auditors verify the accuracy of balances (such as assets, liabilities, and equity) through confirmation procedures, recalculating amounts, and reviewing supporting documentation.

    • Internal Controls Evaluation: A key part of a financial audit involves assessing the effectiveness of internal controls to prevent errors, fraud, or misstatements.

  3. Conducting the Audit Procedures:

    • Substantive Testing: This involves detailed testing of financial statement items, like confirming bank balances or examining expenses to verify their legitimacy.

    • Control Testing: Auditors also test the organization's internal controls to ensure they are designed properly and functioning effectively to ensure accurate financial reporting.

  4. Review and Analysis:

    • Auditors analyze the company’s financial information, comparing it with prior years, and expected performance.

    • They will investigate discrepancies and inconsistencies to ensure the company’s accounting practices are in line with standards.

  5. Audit Findings and Report:

    • Audit Report: The final audit report includes the auditor’s opinion, any discrepancies found, and recommendations for improving controls and procedures.

Summary:

A financial audit is a critical process that ensures the accuracy and reliability of an organization’s financial statements. It enhances transparency, detects fraud, ensures compliance, and provides confidence to investors, regulators, and other stakeholders. By verifying that financial data is correct, auditors help companies maintain their financial health, reduce risks, and improve internal controls.

Audit
Why CFBS?

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CFBS’ Internal Audits provides an independent, objective assurance and consulting activity designed to continuously add value and improve an organization’s operations. We help organization’s accomplish its objectives by bringing a systematic, disciplined approach to continuously evaluate and improve the effectiveness of risk management, control, and governance processes. Our more than fifteen (15) years of experience, professional service practice & recognized excellence, education & training gained from various industries can give you much leverage & advantages.

Continuously improve & reach your objectives in the midst of the ceaseless & speedy changes in market conditions!
Contact us now for a FREE QUOTATION!

We’ll be glad to hear from you, including about your special or customize requirements.

Why CFBS
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