Audit services are an essential part of determining a company's profits and losses, as they can save the company from misusing the profits generated. Audits prevent frauds from happening in the company's finances and provide a clear picture of earnings to the stakeholders. If you are looking for Audit Services in the Philippines, then this article is for you.
What is an Audit?
An audit is an overview examination of the financial statements of a company, to make sure that the financial records of the company are accurate and error-free. Either of the two methods generally performs audits,
- Externally, by hiring a Chartered Accountancy firm, or
- Internally, by the employees of the company.
Generally, the Commission on Audit (COA) is the agency that performs audits on the taxpayer's returns and carries a negative feeling about your profits.
Why do We Conduct Audit?
The purpose of conducting an audit is to prevent financial problems and ensure that everything is running smoothly. Here are some of the reasons to conduct an audit:
- To assure the smooth operation of a company
Conducting audits helps companies realise what part is making losses and what part is making profits. By assessing the data given out by auditors, companies can decide what can be done.
- To ensure that Administrative Regulations are followed
By maintaining dignity in the financial structures of the company, there will be no such obstructions from the government in terms of tax returns and recoveries
- To support the company's name in the community
Maintaining a good reputation in the community will further increase the chances of gaining customers, thereby generating more revenue to the company.
- To perform a careful analysis of the company to the investors/stakeholders
Audits are generally conducted for investors to have a check on what all is going in the company, whether if the company’s profits are managed perfectly, whether all the employees are satisfied with their salaries or not etc.
Types of Audits in the Philippines
Various kinds of audits are conducted in a company. Some of them are:
This type of audit is generally done to analyse the costs that have incurred in a construction project. This is to ensure that the investors have an insight in the planning phase, and set some standards and rules regarding expenditure, safety, billing etc. and also discuss potential risks, time constraints, equipment usage rules and various other factors. With an investment in the right auditing firm, a good audit report will be an excellent return for investment.
A Compliance Audit is generally conducted to ensure that a company is functioning according to the prescribes rules and regulations of the government of the country in which the company is situated. This type of audit is generally done in Large-scale industries and Educational institutions.
A Financial Audit is a type of audit that is done by a company to ensure fairness in the financial reports of the company. The primary purpose of doing this is for investors, directors, managers and government officials know that the financial statements of the company are complete and exact.
An operational Audit is done to analyse the planning processes, the procedures, the goals set for the month/year, and the results of a functional business. This is done for providing recommendations to improve the business.
Tax audit is the most common audit done in a company. A tax audit is a formal way of examining your tax returns, to verify information or to reveal any tax fraud done. This is usually done to ensure that the company doesn't pay more tax than mentioned, and save money.
An Investigative Audit is done in the company if there are any speculations of fraudulent and illegal activity going on within the company. The main focus is to eliminate any fraudulent activity that can defame a company’s name.
These are some of the types of audits generally conducted within the company. Now let’s look into how do we appoint an auditor.
Appointing an Auditor in the Philippines
An Auditor is basically a person or a firm, who takes care of the auditing process of the company. For the person/firm to act as an auditor, there are a set of rules and regulations, mandated by the Government of the Philippines, that have to be followed.
Commission on Audit, or more formally known as COA is the governing body of the audit firms in the Philippines, which regulate the audit firms in the country. The commission has the authority to examine, audit and settle all accounts of the revenues and expenditures of the Philippine Government. The COA also has an exclusive power to define the methods of Auditing in the state. To know more about the Auditing rules, click here
Role of an Auditor in the Philippines
The primary function of an auditor in the Philippines is to understand the company's financial statement and report on it. He or She would report to
- The compliance of the Financial Reports with the local laws and guidelines
- Computing taxes and preparing tax returns
- Inspection of the company’s account logbooks and accounting systems
- Maintenance of the financial records
- Suggestion for better ways to save taxes and improve profits.
So, these are some of the essential things that should be known if you are setting up a business in the Philippines and require an Audit Service. We at Business Setup Worldwide do offer auditing services like statutory audits, independent reviews, Compliance audits and many more, in the Philippines. Contact us for more. We are happy to help you out!