External audit, also known as independent audit, is an independent examination of a company’s financial data and records by a certified public accountant (CPA). The purpose of external audit is to express an opinion on whether the financial statements are prepared in accordance with the accounting standards in Saudi Arabia.
External audit is mandatory for all public companies in Saudi Arabia. Private companies listed on the Capital Market Authority (CMA) are also required to have their financial statements audited, with some exceptions from appointing an external auditor, but they may choose to do so voluntarily.
The Saudi Organization for Certified Public Accountants (SOCPA) is the professional body that regulates the accounting profession in Saudi Arabia. SOCPA sets audit standards and registers and licenses accountants to practice auditing in Saudi Arabia.
The external audit process in Saudi Arabia typically involves the following steps:
- The auditor meets with the company’s management to discuss the scope of the audit and gain an understanding of the company’s operations.
- The auditor reviews the company’s financial records and accounting procedures.
- The auditor performs tests on the company’s internal controls.
- The auditor prepares an audit report that expresses an opinion on the fairness of the company’s financial statements.
Responsibility for Preparing Financial Statements and Reports
The responsibility for preparing financial statements correctly and presenting them fairly rests with the company’s financial management. The auditor audits the financial statements to ensure that they are free from material misstatements resulting from errors or fraud.
The four basic financial statements to be presented with the auditor’s report are:
- Statement of Financial Position
- Income Statement
- Statement of Changes in Equity
- Statement of Cash Flows
The auditor issues the report after applying auditing procedures to the previous financial statements for discussion with the company. The auditor’s report is an important document used by investors, creditors, and other stakeholders to assess a company’s financial position. The report is also used by regulatory bodies to monitor companies’ compliance with applicable laws and regulations.
External audit plays an important role in ensuring the transparency and reliability of financial information in Saudi Arabia. By providing an independent opinion on the fairness of the financial statements, external auditors help protect the interests of investors, creditors, and other stakeholders.
Benefits of External Audit in Saudi Arabia:
- Helps to ensure the accuracy and reliability of financial information.
- Helps to detect fraud and other irregularities.
- Helps to improve corporate governance.
- Helps to protect the interests of investors and creditors.
- Helps to ensure compliance with regulations.
How to Choose a Good Auditor:
- Auditor’s experience and qualifications.
- Auditor’s reputation.
- Auditor’s independence.
- Auditor’s fees.
Benefits of Financial Statements and Independent Auditor’s Report:
- Company management:Through financial statements and reports, company management can determine its ability to use the company’s resources optimally to achieve profits.
- Current and potential investors:Through financial statements, companies can attract many investors and encourage them to invest in the company to achieve more returns.
- Commercial creditors:Through its strong financial statements, a company can gain negotiating power in obtaining credit limits and payment terms.
- Regulatory and government bodies:Regulatory bodies use financial statements to monitor activities and collect zakat and taxes.
By choosing a reputable and experienced CPA, you can help ensure that your external audit is conducted properly and that you receive a high-quality audit report.
Ibrahim Al-sulmi Company offers a comprehensive range of accounting and consulting services, including accounting, auditing, financial and tax consulting, and handling tax and zakat issues. The company has a distinguished team with high capabilities and practical experience in dealing with all types of cases.
