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Audit of Financial Results: A Comprehensive Guide
An audit of financial results is an independent examination confirming the accuracy of an organization's profit and loss figures. It ensures compliance with accounting principles, verifies income and expense recognition, and assesses profit tax calculation reliability. This process aims to enhance financial statement credibility and identify material misstatements, providing stakeholders with assurance regarding financial performance and reporting integrity.
Key Takeaways
Verifies financial results accuracy and regulatory compliance.
Identifies misstatements in income, expenses, and tax calculations.
Provides an independent opinion on financial statement reliability.
What is an Audit of Financial Results?
An audit of financial results is an independent, systematic examination confirming an organization's reported financial performance accuracy and reliability. It verifies correct financial result formation, strict adherence to the accrual principle, and accurate reflection of all income and expenses. It also assesses profit tax calculation reliability and ensures comprehensive information disclosure. This objective assessment enhances transparency and stakeholder confidence in financial statements.
- Correctness of financial result formation
- Adherence to the accrual principle
- Correct reflection of income and expenses
- Reliability of profit tax calculation
- Completeness of information disclosure in reporting
What are the Key Goals of a Financial Results Audit?
The primary goal of auditing financial results is to confirm profit and loss indicator reliability in financial statements, assuring investors and management. This process rigorously checks compliance with legislation and accounting standards, ensuring lawful financial operations. Auditors control correct tax base formation for profit tax, identifying material misstatements. Ultimately, the audit enhances overall reliability and credibility of financial reporting.
- Confirmation of profit (loss) indicators reliability
- Verification of compliance with current legislation
- Control over correct formation of the tax base
- Identification of material misstatements
- Enhancing financial statements reliability
What Specific Tasks Does a Financial Results Audit Involve?
A financial results audit involves specific tasks for comprehensive performance verification. Auditors check income recognition via accrual method, ensuring revenues are recorded when earned. They verify expense validity and documentary support. The audit controls cost of goods sold, examines other income/expenses, and oversees closing accounts 90 ("Sales") and 91 ("Other Income and Expenses"). It also verifies account 99 formation and net profit reflection in account 84.
- Verification of revenue recognition using accrual method
- Verification of validity and documentary support of expenses
- Control over cost of goods sold formation
- Verification of accounting for other income and expenses
- Control over closing accounts 90 and 91
- Verification of account 99 formation
- Verification of net profit reflection in account 84
What Regulatory Framework Governs Financial Results Audits?
The regulatory framework for financial results audits ensures strict adherence to legal and accounting principles. Key legislation includes Federal Law No. 402-FZ "On Accounting," setting general rules. The Tax Code of the Russian Federation, Chapter 25 "Profit Tax," provides tax calculation guidelines. Specific Accounting Regulations (PBU) dictate financial element recognition. The organization's internal accounting policy is also critical.
- Federal Law No. 402-FZ "On Accounting"
- Tax Code of the Russian Federation (Chapter 25 "Profit Tax")
- PBU 9/99 "Organization's Income"
- PBU 10/99 "Organization's Expenses"
- PBU 18/02 "Accounting for Profit Tax Calculations"
- Organization's Accounting Policy
What Information Base is Used in a Financial Results Audit?
A robust information base is essential for a thorough financial results audit, providing auditors data for an informed opinion. This base includes the Statement of Financial Results (Income Statement) and Balance Sheet, summarizing performance and financial position. Detailed transactional data is in the General Ledger and Trial Balance. Auditors examine primary accounting documents to verify transactions. Contracts and the Profit Tax Declaration assess tax compliance.
- Statement of Financial Results
- Balance Sheet
- General Ledger
- Trial Balance
- Primary accounting documents
- Contracts with counterparties
- Profit tax declaration
Which Accounts are Primarily Audited for Financial Results?
Auditors primarily focus on specific accounts directly impacting profit or loss, ensuring accuracy. "Income and Expenses" forms the foundation. Key operational accounts include Account 90 "Sales" for ordinary activities and Account 91 "Other Income and Expenses" for non-operating items. These close into Account 99 "Profits and Losses," accumulating the final result. Net profit/loss transfers to Account 84 "Retained Earnings." Account 68 "Taxes and Fees" verifies profit tax liabilities.
- Income and expenses (concept)
- 90 "Sales"
- 91 "Other income and expenses"
- 99 "Profits and Losses"
- 84 "Retained earnings (uncovered loss)"
- 68 "Calculations for taxes and fees"
What are Common Errors Identified in Financial Results Audits?
Financial results audits frequently uncover typical errors distorting reported performance. These include incomplete income reflection (understated revenues) or overstated/unjustified expenses (lower profit). Violations of the matching principle, where expenses are not matched to revenues, are common. Errors in allocating income/expenses to correct periods, incorrect profit tax calculation, and untimely account closing also occur. Discrepancies between accounting and tax records are significant concerns.
- Incomplete reflection of income
- Overstatement or unjustified recognition of expenses
- Violation of the matching principle
- Errors in allocation to reporting periods
- Incorrect calculation of profit tax
- Untimely closing of accounts
- Discrepancies between accounting and tax records
What are the Possible Outcomes of a Financial Results Audit?
The audit outcome is formally communicated through an audit opinion, an independent assessment of financial statements' fairness. An unmodified opinion indicates fair presentation, in all material respects, according to the applicable framework. Conversely, a modified opinion is issued when statements are materially misstated or insufficient audit evidence exists. This modified opinion signals concerns regarding reporting reliability.
- Unmodified opinion
- Modified opinion
Frequently Asked Questions
What is the main purpose of auditing financial results?
It confirms profit/loss reliability, ensures compliance with accounting principles and legislation, and identifies material misstatements, enhancing financial reporting credibility.
Which key accounting principles are verified during the audit?
Auditors verify adherence to the accrual principle for income recognition and the matching principle for expenses, ensuring correct period recording.
What documents are crucial for a financial results audit?
Crucial documents include the Statement of Financial Results, Balance Sheet, General Ledger, Trial Balance, primary documents, contracts, and profit tax declaration.
What are common errors found in financial results?
Common errors include incomplete income, overstated expenses, matching principle violations, period allocation errors, and accounting/tax discrepancies.
What does an unmodified audit opinion signify?
An unmodified opinion means financial statements present fairly, in all material respects, the entity's financial position and performance per the reporting framework.
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