The purpose of an audit is to establish whether or not the financial statements contain any material misstatements, and legislative changes have placed a greater emphasis on the auditor to objectively consider the risk associated with misstatements in the profit and loss statement (statement of financial performance), balance sheet (statement of financial position), and notes to the accounts. Having established the risk profile of an entity, the auditor must then construct an audit program designed to lessen the risk that the misstatement/s may not be detected.

In assessing risk, a level of materiality is set to determine whether any individual transaction, if misreported, would have the effect of materially affecting the overall presentation; that level, for example, might be 10% in the reported expenses, so that if the value of the discrepancy is less than 10% of all expenses, it may not be considered a material issue. For some items, the level of materiality might be such that the balance reported has to be 100% correct –such as bank balances.

The auditor would look at income and expenses to determine whether all income and expenses have been correctly disclosed; whether the supporting documentation reflects the reported figures, and whether the reported figures are supported by appropriate documentation. Similarly, for the balance sheet, the auditor will be concerned to be assured that the assets and liabilities reported can be confirmed by supporting documentation, and that there are no assets and liabilities present that have not been included in the balance sheet.

It is important to note that the auditor must be independent of the preparation of the financial statements, which is the responsibility of the Board/Committee and management.

Our audit program is constantly revised to ensure that the auditing standards are met, and that the processes will detect any irregularities that may be present in the client’s bookkeeping systems.

When the audit is completed, we will provide the Board/Committee and management with comment and suggestions, if necessary, for the improvement in internal controls to minimize risk, and suggest ways in which recording and maintenance of records may be made more efficient and comprehensive.