Primary navigation:

QFINANCE Quick Links
QFINANCE Topics
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Accountancy Checklists > The Accounts Filing Process and Its Importance

Accountancy Checklists

The Accounts Filing Process and Its Importance


Definition

Every business is required to file accounts on an annual basis with the relevant authorities. These accounts should detail items of expenditure and revenue and outline the profit on which tax is payable. There are various issues that a business owner must be aware of when filing accounts. Accounts must be filed by a particular date, and this is usually determined by the accounting reference dates, which determine which period the accounts cover and identify the financial year-end—normally accounts must be submitted by a set date after the year-end. Missing this deadline can result in penalties.

Many companies also have their accounts audited, perhaps because this is required by a bank or lenders, or by national legislation. If accounts are audited, the auditor’s report must be included with them when they are submitted to the relevant authorities and shareholders. Company directors may appoint auditors to hold office until the first general meeting. After this, the auditors are normally appointed at a general meeting at which accounts are considered. The auditor must be a member of a recognized supervisory body and eligible under the rules of that body to act as a company auditor.

Back to top

Advantages

  • Auditing the accounts gives shareholders and managers a clear financial overview of a business and its various departments, thus highlighting problems that need to be addressed.

  • Auditing helps to prevent and to detect fraud. An audit can uncover fraud and mistakes while staff are deterred from committing fraud if they know that a regular audit is conducted.

  • Carrying out a regular audit helps to ensure that the records are up-to-date at all times.

Back to top

Disadvantages

  • Conducting an audit can be time-consuming and costly, particularly for a small firm.

  • By interrupting the work of key staff, an audit can delay the provision of services and goods to clients.

  • Conducting an audit is not a guaranteed way of exposing fraud because staff may manipulate the information supplied to the auditor.

Back to top

Action Checklist

  • Establish whether your business needs to be audited. Many lenders are happy to accept formal accounts supported by an accountant’s report. Small companies are usually exempt from audit requirements.

  • Select an auditor carefully. Establish whether they have experience of the industry in which you are operating and look at several auditors to verify costs.

Back to top

Dos and Don’ts

Do

  • Continually evaluate whether you need to conduct an audit. Your requirements and those of the authorities and lenders can change.

  • Contact a tax consultant immediately if the tax authorities decide to audit your business.

  • Understand the purpose and scope of the audit. This is critical to passing the audit, the scope and purpose of which can vary significantly from one auditor to another.

Don’t

  • Don’t forget that your accounts must be up-to-date and accurate if the audit is to prove effective.

Back to top

Further reading

Books:

  • Johnstone, Karla M., Audrey A. Gramling, and Larry E. Rittenberg. Auditing: A Risk-Based Approach to Conducting a Quality Audit. 9th ed. Mason, OH: Cengage, 2013.
  • Soltani, Bahram. Auditing: An International Approach. Harlow, UK: Pearson Education, 2007.

Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share