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6 Stages of External Audit Procedure

An external audit focuses on a company’s performance and compliance. All the records related to the audit are examined in an external audit to make sure no errors exist in the financial statement. Which is important for investors and regulatory requirements. External auditors have no affiliation with a company being audited, which offers the business an unbiased audit. An external auditor in UAE passes through some key formalized phases when they are auditing financial statements for clients, Why an external audit is important in Dubai?

Stages of the External Audit Process in the UAE

The stages of external audit involve the determination of a company’s performance and compliance by:

  1. Preparing an External Audit Plan
  2. Thoroughly Understanding the Client Company
  3. Assessing Risk
  4. Performing Control Tests 
  5. Finalizing Audit Findings
  6. Issuing Audit Report

Therefore, in other words, stages of the external audit include planning, understanding, assessing, analyzing, finalizing, and preparing an audit report to get a complete overview of the company’s financial standing. 

1. Preparing an Audit plan

The first stage of an external audit involves the auditor looking over the information contained in the documents and planning out how the audit will be conducted. A workshop may be conducted to identify possible problems in the future. An audit plan was then drafted. Auditors from leading audit firms in Dubai also need to identify the key areas of inquiry, concern, and the specific information they wish to examine in order to analyze those areas.

2. Obtaining an Understanding of the Client

Auditors in Dubai, UAE must attain a sufficient background of a company to assess the risk of material misstatement on financial statements and to design the nature, timing, and extent of further audit procedures. The risk assessment procedures used here may include inquiries of management and others within the entity, analytical procedures, observation and inspection, and other procedures.

Obtaining an understanding of internal control is an essential part of this stage. As it allows the auditor to identify areas that may be misstated. And to design other procedures based on the characteristics of the existing system.

3. Assessing the risk of Misstatement.

Auditors in the UAE use the information collected while obtaining their understanding of the client. And its environment to identify classes of transactions account balances, and disclosures that might be materially misstated. however, risk assessment provides auditors evidence on potential risks of material misstatement.  The risks of material misstatement are composed of inherent and control risks for relevant assertions. Inherent risk is the susceptibility of a relevant assertion to material misstatement, assuming that there are no related controls.

4. Performing tests of Controls

Performing Tests of controls are to determine whether key controls are properly designed and operate effectively.

Consider the control activity in which the accounting department accounts for the serial sequence of all shipping documents before preparing the related journal entries.  The importance of this control is to ensure that each shipment of merchandise is recorded in the accounting records.

5. Completing the Audit

Also, the audit was finalized and some procedures were re-performed to ensure validity. At this point, final decisions are made relating to the financial statement disclosures. The auditor will hold meetings with senior management to discuss the findings.

6. Audit Report

A standard unqualified audit report is issued when the examination and the results thereof are satisfactory. This report is also modified as the audit examination deviates from normal.

Find out more:  What is the Difference Between a Qualified and Unqualified Audit Report?

External Audit services in Dubai

There are several certified auditors in Dubai and the rest of the UAE but for an effective audit, the system you need to hire seasoned intelligent auditors to track the financial status of your company. Farahat and Co. have years of experience in providing auditing services in the UAE. We have extensive knowledge that helps clients conduct an external audit.

Contact audit firm in Dubai, Sharjah, Abu Dhabi UAE - certified auditors in Dubai, we provide results-oriented services to our clients. If you are searching for expert auditing firms in the UAE, you may contact us for further consultation.

Read more: Difference Between Internal Audit and External Audit

Jose’s entire educational and professional career has circled around audit and assurance. While in India, he became a CPA and worked as an accountant and an auditor. Afterwards, he relocated to Dubai, where he joined Farahat & Co. as an auditor. He is currently assisting UAE mainland and free zone businesses with their compliance needs. With a reputation for proficiency, quality, and reliability, clients refer to Mr. Jose for independent assessments of organizations structures and operations.