In Tanzania, the NAOT (National Audit Office of Tanzania) is the authority that sets the appropriate audit standards in the country. According to the Companies Act of 2002, the government mandates that an audit is to be conducted by a company unless they meet a specific criterion, which is to be specified by the Ministry of Finance and Planning (MoFP).
An audit is a process of examining a company’s financial statements, to keep a check on the company’s financial position, cash flow, and the operations using standard accounting and auditing principles. For businesses in Tanzania, an audit is essential, as it gives a level of trust and assurance for investors to have a reason for investing in the business. During an audit, the financial data is taken and is observed and physically checked by auditors, along with testing of certain transactions using supporting documents. This is to prevent discrepancies in the financial data of the company.
With Tanzania being one of the first places in the sub-Saharan region, the country is targeted by investors as the leading destination for starting a business, and as companies are increasing, it is also necessary for them to conduct audit procedures in Tanzania. Here is how the audit system in Tanzania works.
In Tanzania, the NAOT is the supreme authority that regulates and sets the audit standards and procedures in the country. Any company that is established in Tanzania must conduct an audit as per the rules and regulations mentioned in the Public Audit Act, 2008. This can be done by appointing a Certified Public Accountant (CPA), who can be an employee of the organisation or an approved audit firm in Tanzania, that is registered with the NBAA (National Board of Accountants and Auditors). The firm/CPA must keep all the documents ready during the process of audit and must be prepared at all times to face an external audit from the CAG (Controller and Auditor General) of NAOT.
Let us now see what types of audits are conducted in Tanzania.
In Tanzania, these are the types of audits conducted. They are:
A regularity audit is done by a company to evaluate and examine
A forensic audit is conducted by the company as proof of evidence during any dispute with the vendors or service providers. The audit procedure is similar to that of a regularity audit but focuses more on finding any kinds of frauds or mishappenings within the company.
A performance audit is conducted by the government, to understand the proper usage of the public funds, resources, and the appropriate functioning of accounting officers and chief executive officers of a company. This type of audit is generally performed by the CAG on public companies so that they can understand the flow of government funds.
A special audit is conducted by the company or the government, to gain more insights about the specific departments and whether they comply with government regulations or not. The CAG can undertake this type of audit on any business in Tanzania.
Once you get to know about the types of audits conducted by the government, it is necessary to appoint an auditor. Here is some information on designating an auditor in Tanzania.
The main objective of availing an audit service in Tanzania is to relieve most of the burden of your shoulders and give an independent's opinion on your company's accounts. Here are some of the benefits of availing audit services in Tanzania.
The risk factor has a significant role in most of the business, irrespective of the size of the establishment. Business owners are to take an active part in understanding these risks, from strategy to financial, and what better way to understand them other than conducting an audit. Performing an audit will help owners ensure to place correct systems and follow the appropriate procedure to avoid any potential risks
Understanding the weaknesses of the company's accounting systems is an essential thing for a business owner. By conducting audits, the business owner can get to know the flaws, so that the person can take some critical decisions, in terms of sales and outputs.
By conducting audits, an auditor can give an opinion about some of the business accounting processes. Most of the business owners do not have enough understanding of their company in terms of accounting principles or financial structures etc. Conducting an audit will give business owners an insight about the accuracy of the valid data of their company, and will help in securing investments
Legal issues usually arise in a company if the data provided to the government is inaccurate or fraudulent. This will also affect the assurance factor with the investors and lenders. Conducting audits will help in limiting tax and legal issues.
Conducting an audit will let the business owners know more about the finances of the company, and will also help them in pointing out errors in the current accounting process. Auditors can even advise the business owners in improving their accounting process and provide seminars about the same.
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