A formal examination of a company’s financial statements and records to ensure accuracy, compliance with laws, and alignment with UK accounting standards.
The conclusion the auditor provides at the end of an audit, stating whether the financial statements are fairly presented. The main types are unqualified (no major issues found), qualified (some issues or limitations), adverse (misleading information), and disclaimer (unable to give an opinion).
A formal statement issued by the auditor after an audit, summarising the findings and the audit opinion. It’s often included with the financial statements.
An independent auditor from outside the company who conducts an audit to provide an objective review of the company’s finances.
An employee or hired expert who assesses a company’s financial processes, internal controls, and compliance on an ongoing basis. Internal audits help identify issues early.
Formal records showing a company’s financial position, performance, and cash flows. These typically include the balance sheet, income statement, and cash flow statement.
A financial statement showing the company’s assets, liabilities, and equity at a specific date. It gives a snapshot of the company’s financial health.
A report showing the company’s revenues, costs, and profits over a certain period, helping to assess its profitability.
A financial statement showing the cash inflows and outflows over a period, divided into operating, investing, and financing activities.
A concept referring to the significance of a financial item. If an item is “material,” it’s important enough to potentially affect decisions based on the financial statements.
Documentation or records that support the amounts and disclosures in the financial statements, such as invoices, contracts, and bank statements. Auditors use evidence to verify accuracy.
The process of comparing two sets of records (like bank statements and company records) to ensure they match and identify any differences.
A process where auditors identify areas that might be more prone to errors or fraud in the financial statements and decide where to focus their efforts.
When an auditor reviews a selection (sample) of transactions or accounts rather than checking every item. This allows them to draw conclusions efficiently while managing time and resources.
Policies and procedures that a company puts in place to protect its assets, ensure accurate record-keeping, and prevent fraud or errors.
An assessment of whether the company can continue operating for the foreseeable future without needing to liquidate or restructure significantly.
A claim made by management in the financial statements, such as the completeness, accuracy, and valuation of assets or liabilities. Auditors test these assertions.
The estimated market value of an asset or liability, often used for valuing certain assets like investments, even if the company doesn’t intend to sell them immediately.
A method where revenue and expenses are recorded when they’re earned or incurred, rather than when cash is exchanged. This method gives a fuller picture of financial health.
The process of allocating the cost of a tangible asset (like equipment) over its useful life, reflecting wear and tear.
Similar to depreciation, but it applies to intangible assets (like patents) rather than physical assets.
Amounts the company owes to others, like loans or unpaid invoices. Liabilities appear on the balance sheet and are classified as current (due within a year) or long-term.
The value remaining in the company after subtracting liabilities from assets. It includes investments from owners and retained earnings (profits reinvested in the business).
Amounts set aside to cover future expenses or liabilities, like potential legal claims or warranty obligations. Provisions are an estimate rather than a precise figure.
The point at which revenue is recorded in the financial statements, based on specific criteria. UK companies must follow revenue recognition standards to ensure accuracy.
When an asset’s market value falls below its carrying (book) value. Impairment adjustments are made to reflect this loss in value.
The possibility of intentional misstatements or omissions in the financial statements. Auditors assess fraud risk to take appropriate steps during an audit.
Any deal or arrangement with individuals or companies that have a close relationship with the business, like transactions with directors or shareholders. These must be disclosed.
Following laws, regulations, and standards that apply to financial reporting. Compliance is a key focus of audits to avoid penalties or legal issues.
Events occurring after the balance sheet date but before the auditor’s report, which could affect the financial statements. These may need disclosure if they’re significant.
