A balance sheet audit is an evaluation of the accuracy of information found in a company's balance sheet. It involves a number of checks as auditors conduct this evaluation based on supporting documents. After a balance sheet audit, you can use the analyses to detect irregularities or weaknesses in your company's accounting system.
Previous Period Comparisons
Auditors compare figures from the current balance sheet with numbers from the previous period balance sheet. If there are significant differences between the financial statements, auditors dig deeper into the records to try to find a satisfactory reason for the change. For example, if the value of accounts payable has seen a marked increase, the auditors will try to determine the reasons for this increase. They will consider whether these reasons make sense in the context of the business.
Adequacy of Provisions And Reserves
When conducting balance sheet audits, the reviewers look into the status of credit extended by the firm to its suppliers and customers. By examining related documentation, they gauge whether the probability of payment for these debts is high, doubtful or somewhere in between. Based on this determination, they check if the provisions set aside by the company for bad debts are sufficient. Auditors also determine if the company's provisions for depreciation and other anticipated losses are at reasonable levels.
Accuracy of Valuations
Auditors examine whether the figures assigned to the various headings under the balance sheet are accurate. They compare the information in the financial statement with third-party documentation. For example, auditors will determine if the assets and liabilities found in the balance sheet exist. They confirm that the assets legally belong to the company and the liabilities properly attach to the firm. They also check restrictions on the use of the assets, and whether those restrictions must be disclosed.
Exceptional or Non-Recurring Items
Auditors also scrutinize the balance sheet for special transactions, one-time significant changes or other conditions with material effects on the figures. For example, they take note of any ongoing litigation that may impact the company's assets, liabilities or revenues. They pay special attention to any extraordinary transactions that cause significant changes to company profits. They also highlight changes to the accounting method that the company uses. This information helps business owners prepare for the next period because it separates those special circumstances that are unlikely to be repeated.
When audited balance sheet is required?
1. For Company- As per Companies Act, a Company is required to get its accounts audited by a Chartered Accountant.
2. For other than Company- As per Section 44AB of the Income Tax Act 1961, any person carrying on business is required to get his book of accounts audited if total sales, turnover or gross receipt in business for a financial year exceeds Rs. 1 crore
What is important in balance sheet?
Also called a statement of financial position, a balance sheet shows what your company owns and what it owes through the date listed, as Accounting Standard states. It displays this information in terms of your company's assets, liabilities, and equity. ... Liabilities are payments your business needs to make.
What are the 7 audit assertions?
These assertions are as follows:
| Service | Price | GST | Total |
|---|---|---|---|
| Statutory Audit(Above 3 Crore Upto 10 Crore Turnover Along With AOC-4 & MGT-7) | 26500.00 | 4770.00 | 31270.00 |
| Statutory Audit(Upto 3 Crore Turnover Along With AOC-4 & MGT-7) | 17500.00 | 3150.00 | 20650.00 |
| ADT 1 | 4500.00 | 810.00 | 5310.00 |
| Trust/NGO/School/College/Club/Society Audit | 7000.00 | 1260.00 | 8260.00 |
