The external audit in Qatar is an investigation that has a detailed look into a company’s financial performance, conducted by an auditing firm not directly or indirectly associated with the business it is auditing. Usually, it starts by scrutinizing a company’s accounting records to see if they are accurate and also looks into the recordkeeping processes followed.
There can be different reasons for conducting an external audit. One reason may be to know if the business is following the right accounting practices as per the common accounting standards. The auditor’s report is compared with the company’s financial statements to ascertain if there is a difference between the business’s actual and reported company finances and overall financial wellbeing.
When Do Companies in Qatar Need an External Audit?
Qatari business owners need an external audit when they want to know how their business’s management is performing. Large businesses with ownership separate from the control mandate for the owners to see how the operations are run. An external audit in Qatar allows the ownership and all stakeholders to know if the management is performing in a competent manner and if the investments they have made are secure or not.
In some cases, the Qatari government authorities or agencies may ask a business organization to have an external audit. The government may need to look at any potential fraudulent activities done by a business organization. In Qatar, businesses need to have a reputable Qatari accounting and auditing firm (approved by the authorities) to conduct an external audit.
Tasks of a Qatari External Auditing Firm
A Qatari auditing firm or company that specializes in conducting external audits can perform an external audit. The governing statute requires certain qualifications for an auditor to perform audits. Auditors in Qatar have to be approved. External audits need an organization’s business plan and also corporate bylaws. An external audit is usually called upon or mandated.
International Standards and Professional Associations Overseeing External Audits
IAASB – The International Auditing and Assurance Board defines the consistency and quality of the auditing best practices globally.
IRCA – International Register of Certified Auditors certifies auditors and provides training
ACFE – The Association of Fraud Examiners sets the standards for auditors to offer them certification credentials to qualified individuals.
These among many other international organizations supervise audits globally, defining GAAS (Generally Accepted Auditing Standards) and IFRS (International Financial Reporting Standards).
Whenever there is a call for an external audit, it also includes the certifications required by an external auditing firm to conduct such an audit. In most cases, the Qatari authority calling for the certification will need the auditing firm and its primary or lead auditors to have those qualifications.
How Does an External Audit Benefit Qatari Companies?
It is not easy to exactly quantify how an external audit can benefit a company in Qatar. An increase in ROI or greater profitability is usually not the objective. Most companies describe the benefits and values that they want to have an external audit like security, greater confidence, and comfort.
The companies know via external audits that they can trust the financial statement issued, its accuracy, and representation as per the true status of the company’s actual financial position. They can confidently share such information with potential investors and include it in the company’s financial reports.
An external audit in Qatar often improves confidence in a company’s internal auditing processes. An external audit also exudes more trust in the management’s overall competence and good standing as per the business statutes.
One of the advantages is reduced changes of management getting sued by government agencies or shareholders. Similarly, the customers also have more confidence in buying products from a company that they see as transparent in its dealings.
External audits in Qatar often provide more insights about the areas in which management lacks competency and provide improvement suggestions in such areas.
Still, statutory limits make it difficult for auditors to share details regarding non-financial activities. An auditor’s report focuses primarily on the quality of financial reporting. In most cases, auditors do not pass any additional information.
Scope of the Work of an External Auditing Firm in Qatar?
The scope of the external audit in Qatar is constrained by the regulations. Some auditing firm owners do advocate the need for external auditors to have more information to provide greater value.
BookkeepingQatar.com understands the value of such information and therefore focuses on delivering insightful external auditing reports. Therefore, we focus on delivering clients information with regular reports to keep them updated on the ongoing auditing process and the legal limitations for external auditors in Qatar to abide by.
Qatar Free Zone External Audits
Qatari authorities require audited financial statements for the renewal of the license of all companies operating within the Qatar Free Zones. Easy and quick availability of the audited report makes the license renewal process a lot quicker and more convenient.
External Audit in Qatar for Banks and Financial Institutions
Qatar companies approach banks for loans. Thus, banks need an independent outside neutral source to ascertain the actual financial efficacy of a business organization and its credit worthiness. Other financial institutions like leasing companies require the same kind of scrutiny.
The main reason behind conducting of an external audit in Qatar is to gain more confidence in a business’s financial reporting.
Who Relies on Information from an External Audit?
A government agency, person, or organization can ask for an external audit when they have interests in a company’s commercial operations. A financial statement is a document available publicly. External audits are for the preview of a very narrow audience.
Big businesses including the ones owned privately or publicly have a separation between the management and the ownership. Therefore, it is critical for business owners to determine how the business is being done.
External audit in Qatar lets the owners know the accuracy of the financial reports and statements. Therefore, they are able to know the performance of their managers.
There can be other stakeholders interested in the information that an external audit of a Qatari company reveals. Examples of such stakeholders include banks, society in general, employees of the company, government agencies, customers and suppliers. Vendors need to know if they need to keep supplying to an organization based on its ability to pay their receivables on a timely basis.
The employees get a salary from a company and want to know if they will keep getting paid on time. Customers want to know if the products they are buying from a company; will they be able to get after-sales service.
Government agencies want to know the true income of a company for taxation purposes and for legal reasons as well. These officials want to authenticate the information they have received in the form of publicly accessible financial statements. A lot of the companies also need to regularly rely on financial institutions to meet their short-term and long-term funding needs. So, financial institutions automatically become the stakeholders.
Lenders bet heavily on the financial efficacy of an organization. Therefore, they need to ensure that they are receiving accurate information regarding the company’s financials.
Format of an External Audit Report
The financial auditors make a report as per the industry and professional standard format. They use already established formats to make such reports, which allow the readers to quickly find the information they require.
A standard auditing report of the financial statements contains the following.
- Independent Auditor’s Report
- Statement of Financial Position
- Statement of Comprehensive Income
- Statement of Changes in Equity
- Statement of Cash Flows
- Notes to the Financial Statements
Many readers do not look at the financial statements of a company. Instead, they solely rely on an auditor’s report to get all the information they require.
Independent Auditors’ Report
It is a report in a letter from, addressed directly to the Board of Directors of the audited company. The company being audited pays for the auditors’ fees and they need the information in the form of a report. The auditors discuss in it the examined financial statements. The auditors are only responsible for the accuracy of the opinion they are providing regarding the reliability of the information within the financial statements.
The audit report also contains the scope of the audit and an opinion paragraph on the “true and accurate” status of the audited financial statements. If they provide a qualified opinion, they describe the reason for providing it. An unqualified opinion offers assurances that the information contained within the financial statements is trustworthy. A qualified opinion on the other hand is subject to the interpretation of the reader regarding the reliability of the financial statements because of some problems.
There is also an explanatory paragraph that includes when the auditor feels the need to explain a few of the aspects of the auditing process. Such explanation highlights the changes within the regulatory requirements or auditing standards.
Then there is a control paragraph where the auditor opines on the company’s in-place internal controls. This para presents an unqualified opinion about the company’s controls regarding the financial reports.
Additional Components of Audited Financial Statements as per IAS
Here are some of the additional components in an auditors’ report.
- Statement of financial position
- Statement of comprehensive income
- Statement of Changes in Equity
- Statement of Cash Flows
- Notes to the Financial Statements (For completed financial statements per IAS – 1)
Lastly, the auditor provides a detailed description of the company, its accounting processes, the breakup of its assets, equity, revenue, expenses, and liabilities.
Types of Audit Opinions
An unqualified opinion is the one in which the auditor does not reveal material misstatements within the company financial statements. It is considered a favorable opinion, pointing to the fact that the company’s financial statements reflect the company’s true financial status.
An auditor’s report has a qualified opinion, meaning the auditors point to material misstatements during their examination of the company’s financial statements. Or they may have found information of significant nature to be misleading. In such a scenario, the auditor will issue a qualified opinion.
In the adverse opinion the auditor shoes that the financial records do not conform to the IFRS (International Financial Reporting Standards). The financial records of the management misrepresent the company’s financial position.
Disclaimer of Opinion
An auditor may not be able to complete the audit report. There can be a number of reasons for the auditor not being able to complete the report, like for example due to missing of the required financial records. In this kind of situation, the auditor will issue a disclaimer of opinion, stating the auditing firm could not determine the true financial status of the company.
How Can BookkeepingQatar.com Assist with External Auditing in Qatar?
BookkeepingQatar.com has a wide area of expertise within accounting, business advisory, external audit, internal audit, management consultancy, and financial consultancy. We focus on delivering world-class auditing, accounting, and consultancy services to cater to the various needs of our clients.
As the best accounting, auditing, and bookkeeping firm in Qatar, we have qualified and experienced accountants who can fully meet your auditing needs and conduct external audits for banks, financial institutions, and Qatari government authorities.
BookkeepingQatar.com, a leading and reputed auditor in Qatar offers the following services to its clients.
Examination of your business’s financial reports to express our opinion regarding the validity of the information they provided, also known as attestation services.
To perform statutory audits in Qatar as approved auditors for Qatari companies.
Verify that the financial statements are prepared as per the IFRS (International Financial Reporting Standards)
Financial Statements Attestation
To evaluate and attest that your business’s financial statements as external auditors.
To prepare management reports to analyze your company’s performance and offer in-depth management reports.
Review of the Internal Controls
To assess and investigate your company’s internal controls and report on their effectiveness.
Audit and Assurance
To verify independently the information that you are relying upon for making important business decisions with the audit and assurance services.
Assurance to the Lenders & Other Stakeholders
To provide assurance to the various stakeholders interested in your company’s financial performance including lenders, bankers, and financial institutions. This assurance also includes satisfying regulatory requirements of the relevant Qatari government authorities and for enhancement as well as the validity of the financial statements.
Review of the Reporting and Other Processes
To work with the designated audit personnel for assuring internal audit procedures and reporting.
Generate and provide regular reports to determine the ongoing company performance.
Company Policies & Procedures
Examine the financial transactions to review currently in place policies and offer suggestions for their improvement.
It involves investigating the current internal auditing processes to identify potential risks and find as well as suggest ways to effectively overcome them.
Review and Compilation Services
To help our clients in the preparation of standard-compliant financial statements and report our opinions regarding the content of those statements while offering review and compilation services.
Besides offering financial auditing, BookkeepingQatar.com also provides business setup services in Qatar. If you are looking for company formation services in Qatar, you can get in touch with BookkeepingQatar.com. As a full-service accounting firm in Qatar, we provide different services to our clients.
For more information on how BookkeepingQatar.com can assist with delivering the best external audit services for your business in Qatar, drop us an email at firstname.lastname@example.org or call +974 5090 5844.