An audit of a company's financial statements is called an audit. It is usually presented in the company's annual report, which is prepared by auditors. It usually refers to a specific past billing period. The audit report based on a selective review of company performance is the mandatory requirement upon completion of the audit. The report contains an income statement, a balance sheet, a statement of changes in equity and a cash flow statement and explanations with a summary of the significant accounting methods in the notes.An audit reflects the company's financial position at a given point in time, including information about whether everything owned and owed by a company has been correctly recognized in the balance sheet and its losses and profits have been correctly assessed.
The financial report must be prepared according to certain legal requirements. When the report is prepared, it must be approved by the company's executives (e.g. the board of directors) by giving a verdict on its accuracy.Audits may also include: asking formal and informal questions, examining a company's tangible assets such as mechanical and electrical equipment, obtaining written confirmations, testing and monitoring specific procedures carried out on company premises.Audit StandardsThe standards for proper auditing of financial reporting are set by a government. There are International Standards on Auditing (ISAs) available on the internet that provide clear statements that auditors should consider.
They consist of introduction, objectives, definitions, requirements expressed by the phrase "the auditor shall", application and other explanatory material.
There is also an e-Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements, published December 2016, available on the web with translations in English, Arabic, Bulgarian, Danish, French, Georgian, French, Kazakh , Italian, Serbian, Russian, Spanish and Thai . It includes Consideration of Laws and Regulations in the Audit of Financial Statements and Amendments and other international standards consisting of New Requirements Addressing Non-Compliance with Laws and Regulations (NOCLAR) in the IESBA Code of Ethics for Professional Accountants.