Certified Public Accountant Auditor – Professional Financial Statement Audits

What is an Auditor?

An auditor (CPA) is a qualified professional with specialized accounting and legal training, whose role is to conduct an independent and critical audit of financial statements of companies and nonprofits. Unlike a regular accountant who handles bookkeeping on a daily basis, an auditor conducts a thorough and independent examination of the financial statements to attest to their accuracy and the proper execution of accounting transactions in accordance with generally accepted accounting principles.

The role of an auditor is critical in the organization's financial review process and serves as a legal requirement for companies of a certain size, certain types of nonprofits, and public entities. The audit provides assurance to investors, banks, tax authorities, and other parties with an interest in the accuracy of the organization's financial information.

The Difference Between an Accountant and an Auditor

There is a significant difference between the role of a regular accountant and an auditor:

• Regular accountant – handles daily bookkeeping, prepares monthly and semi-annual reports, VAT reporting, annual financial statements, payroll calculations and deductions. He works closely with the organization and serves as an internal consultant.
• Auditor – conducts an independent audit of financial statements that have already been prepared, reviews internal processes, verifies transactions, examines valuation methods and amounts determination. He stands outside the organization and attests to the reliability of the financial statements.

Typically, an auditor does not maintain the company's daily books – he examines them after they have been prepared by an accountant or internal accounting team.

When is a Financial Statement Audit Required?

A financial statement audit is not always a legal requirement, but it is necessary under certain circumstances:

• Private companies of a certain size – companies whose assets exceed a certain threshold or whose income exceeds a defined limit are required to have an annual audit of their financial statements.
• Certain types of nonprofits – public nonprofits, government-funded organizations, or nonprofits managing public funds are required to have an audit.
• Bank and investor requirements – banks or institutional investors may require an audit as a condition for granting a loan or making an investment.
• Tax authority inspections – under certain circumstances, the tax authority may require an independent audit as part of an inspection process.

Even when an audit is not a legal requirement, many companies choose an independent audit to strengthen the credibility of their financial statements with banks, business partners, and other stakeholders.

The Audit Process – What Does the Auditor Examine?

The process of auditing financial statements is systematic and structured. The auditor examines several critical areas to attest to the integrity of the statements:

1. Transaction Verification and Legality

The auditor examines a sample of transactions to ensure they have proper documentation, were duly authorized, and were recorded at the correct time. He reviews invoices, purchase orders, receipts, and payments to verify that transactions are genuine and proper.

2. Examination of Valuation Methods and Amount Determination

The auditor examines how the organization valued assets (such as inventory, receivables, fixed assets) and how it determined provisions and expenses. He verifies that the methods are consistent and proper in accordance with accepted accounting principles.

3. Internal Controls Review

The auditor examines the organization's internal controls – namely, the mechanisms that prevent errors or fraud. He reviews the segregation of duties, authorizations, and internal reviews.

4. Assets and Liabilities Verification

The auditor may require a physical count of inventory, verification of bank balances, confirmation of receivables and payables, and examination of liabilities such as loans and accounts payable.

5. Examination of Post-Report Date Events

The auditor examines events that occurred after the report date to ensure they should be included or disclosed in the statement.

6. Review of Disclosures and Notes to the Statements

The auditor verifies that the statements include all required disclosures in accordance with accounting principles, such as information on accounting policies, risks, and contingencies.

Duties and Powers of the Auditor

The auditor bears significant legal and statutory responsibility. They must hold a valid license from the competent authority, comply with accepted auditing standards, and avoid conflicts of interest.

Auditor's Powers

• Right of access to all records, documents, and data of the organization required for the audit.
• Right to question organization employees and management regarding any matter related to the audit.
• Right to demand clarifications and supporting documentation from external parties such as banks and suppliers.
• Right to express an independent opinion in the audit report, including reservations or adverse opinions if significant issues are found.

Auditor's Duties

• Conduct audits in accordance with accepted and legal auditing standards.
• Maintain independence and objectivity – an accountant auditor cannot have a financial interest in the organization they audit.
• Maintain confidentiality – information disclosed during the audit is professional privilege.
• Report to authorities on significant violations or fraud discovered during the audit, subject to applicable laws.
• Maintain professional liability insurance.

The Audit Report – What Does It Include?

Upon completion of the audit, the auditor issues a formal report. The report typically includes:

• Opinion on the Financial Statements – a declaration as to whether the financial statements fairly represent the organization's financial position and performance in accordance with accepted accounting principles.
• Findings and Observations – description of issues identified, weaknesses in controls, or deviations from accounting principles.
• Recommendations – proposals for improving controls, processes, or accounting policies.
• Statement of Independence – confirmation that the auditor has met independence and legal requirements.

The report is a formal document submitted to management and shareholders of the organization, and in certain cases also to tax and regulatory authorities.

Audit Costs and Timeline

The cost of an audit depends on several factors, and an accurate cost estimate is only possible after understanding the scope of activities and organizational complexity. Generally, costs vary based on the size of the organization, number of transactions, condition of internal controls, and degree of accounting complexity.

The audit timeline also varies – a small audit may take several weeks, while an audit of a large or complex company may take several months. Ben Or Cook will work with you to plan an efficient and compliant audit according to your needs.

Why Choose Ben Or Cook for Financial Statement Audit?

Ben Or Cook Certified Public Accountants provides professional audit services with extensive experience in assisting companies and nonprofit organizations in Petach Tikva, Ramat Gan and the central region. We understand the unique needs of each organization and tailor the audit accordingly.

• Experience and Expertise – Our office team has extensive experience in financial statement audits, internal controls and regulatory reports.
• Personal Service – We provide individual attention to each client and customize the service to their specific needs.
• Digital Services – Significant portions of the audit can be managed digitally, reducing disruption to operations.
• Availability – We are available for questions and consultation during the audit process.
• Free Initial Consultation Meeting – We offer an initial consultation meeting where we can understand your needs and propose an appropriate solution.