Audit

The present work establishes the definition of Audit, its objectives, its implications with the professional code of ethics, we will also list the international financial information standards (IFRS), before international accounting standards (IAS), we will be able to know the rules and procedures of auditing, we will emphasize the working papers, their importance, their brands, and everything related to this topic, on the other hand we will deal with the issue of sampling, we cannot leave out the audit report, a fundamental piece in the culmination of the work. We will classify the different types of audits and describe them for a better learning of each one, we will also deal with the issue of internal control, a fundamental part of the audit process, in addition to this we will review the audit closure,We will see the care that we must have to do a systems audit, as well as the administrative audit, internal audit, operational audit, financial audit and tax audit, providing the reader with a complete tool with everything related to the audit.

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Purpose of the Audit

The fundamental purpose of this work is to emphasize the audit issue, which is of great importance due to changes in the world economy, coming to cover the need for real financial information, avoiding as much as possible making mistakes in accounting records, with the present work being able to apply all the fundamentals of the different types of auditing, putting into practice in the same way the internal control questionnaires and their rules, as well as being able to be prepared for any event that comes before us, during and after the audit is done.

AUDIT

Concept

The audit concept has evolved in four phases:

You must consider the provisions of the law of public accounting and the code of ethics of the public accountant and observe the principles of: independence, integrity, objectivity, confidentiality and professional conduct.

The public accounting firm or organization must ensure that its personnel maintain the technical standards of professional competence and due professional care necessary in order to adequately fulfill their responsibilities.

The degree of technical training and efficiency required in the circumstances of the audit staff are indispensable requirements for their assignment.

In order for the works to meet the appropriate quality standards, sufficient management, supervision, and review procedures must be implemented at all levels to provide reasonable assurance of the results of the work performed.

Whenever necessary, consultations within or outside the firm will take place with those who have the appropriate experience and skill.

An evaluation of clients in the process of acceptance and a review should be carried out, on a continuous basis of existing clients. In making a decision to accept or retain the client, consideration should be given to the firm's independence and ability to service the client appropriately and the integrity of management.

The appropriateness and operational effectiveness of the quality control policies and procedures should be reviewed.

Address

The delegation of work to the assistants must be accompanied by the appropriate address, which is necessary in all cases in order to inform the attendees of their responsibilities and of the objectives of the procedures they are going to carry out: this direction entails informing them of matters such as the nature of the entity's business and of possible situations related to accounting and auditing that may affect the nature, timing and scope of the audit procedures to be carried out.

The useful tools that serve as communication in the performance of the conduct of an audit are basically: the audit program, the time budget, the assignments and necessarily the prior planning of the audit.

Supervision

Supervision, management, and review are closely related, so discharge elements can be applied. The supervisory functions during the audit include:

Monitor the progress of the audit in order to:

• Attendees have the necessary skill and competence in executing their assignments. Audit programs, their objectives and plan are being understood by attendees. Tasks are being conducted according to the audit timeline and respective work schedules. The important accounting and auditing situations that arise in the course of the audit work are raised, their importance is evaluated and, if necessary, the modification of the audit plan and the audit programs. Differences in professional judgment between the personnel are resolved or resolved. they consult at an appropriate level.

Review

The tasks performed by the assistants must be reviewed by assistants of at least equal competence in order to verify the following:

• It was carried out in accordance with the audit program. The documentation of the work carried out and the results obtained is sufficient. All significant issues detected during the work were resolved or indicated in the audit conclusions. In the development of the procedures The objectives of the audit were achieved. The results of the work are consistent with the conclusions reached and serve as support for the opinion of the audit.

Some aspects of the audit engagement should be reviewed in a timely manner.

• The audit plan and the programs derived from it. The timely modification of the audit plan, if any, as a result of the evaluations of the inherent and control risks, and the results obtained from the control tests. of the substantive procedures, the audit evidence obtained and the resulting conclusions. As a result, the audit opinion, the financial statements and the proposed adjustments.

DNA 13: Examination of Prospective Financial Information

The purpose of this Statement is to establish standards and provide guidelines for examining and reporting on prospective financial information, including examination procedures for best estimates and hypothetical assumptions.

This standard clarifies and circumscribes the responsibility of the independent public accountant (CPI) in relation to prospective information, in accordance with the provisions of article 12 of the Code of Professional Ethics of the Public Accountant, which establishes:

This DNA does not apply to the examination of prospective financial information expressed in general or narrative terms, such as the reports for discussion and analysis presented to management in an entity's annual report.

Prospective financial information means projected financial information of an entity, based on assumptions about facts or events that may occur in the future and that will financially affect the plans of this entity in a given economic context. It is essentially subjective in nature and its preparation requires considerable judgment. Prospective financial information may be in the form of a budget, a projection, or a combination of both, for example, a one-year budget and a 5-year projection.

A budget means prospective financial information, prepared based on future events, which management estimates will occur and the actions to be taken, at the date the information is prepared, A projection means prospective financial information prepared on the basis of:

• Hypothetical assumptions about future events and management plans and that this does not imply that such events or events occur. For example, entities in the pre-operational stage or when a significant change in the nature of operations could be estimated, a combination of the estimates and hypothetical assumptions. Such financial information reveals the possible effects as of the date the information is prepared, if the events and actions occur.

STANDARDS AND AUDIT PROCEDURES

Audit work is professional because it requires great skill, which cannot be measured or judged by those who trust the one who performs it.

The organized public accounting, through the Mexican Institute of Public Accountants, aware that the public responsibility that implies the exercise of a profession, faced the problem of professional quality in the audit work and decided to establish the minimum requirements, of order Generally, they must be observed for the performance of a professional quality audit job. These basic principles are called Auditing Standards, and by their nature they must be generally accepted by the entire profession.

• Concept

The Auditing Standards are the minimum essential quality requirements for the auditor's personality, the work he performs and the information he renders as a result of this work.

• Classification

Personal Rules:

• Technical entertainment and professional capacity. Care and professional errands. Mental independence.

Work Execution Standards:

• Planning and supervision. Study and evaluation of internal control. Obtaining sufficient and competent evidence.

Information Standards:

• Relationship with financial statements and accounting. Application of generally accepted accounting principles. Consistency in the application of accounting principles. Sufficiency of disclosure statements. Disclaimer of opinion.

• Personal Rules

They are common to all professions. Technical training is the indispensable means to develop the practical ability necessary for the exercise of a profession and together with constant study and research, they are integrated as the foundation of professional capacity.

Professional activity, like all human activities, is subject to personal appreciation and, therefore, to error. The man is fallible and aware of it, the professional must strive to minimize this degree of error through diligent work, that is, with care and professional diligence.

Regarding mental independence, it is the ability to express judgments and opinions impartially, without altering them in any way due to economic, family, social or any kind of pressure.

Independence of opinion is relevant in the case of the public accountant because their expressions or opinions, stated in the opinion, are of interest to a varied nucleus of individuals who are even unknown to them, to whom a statement contrary to reality may lead to serious consequences.

Work Execution Standards

They are the result of the second personal norm; professional care and diligence , since although it may be difficult to establish the guidelines to determine when one is careful and diligent, if there are some aspects that, if complied with, respond to that obligation of care and diligence discussed.

If the work to be developed is planned, a situation is established that reasonably guarantees the attention of the most important points, as well as the application of the minimum procedures to obtain sufficient elements of judgment for our opinion, this would correspond to the planning.

In practice, the auditor helps assistants to execute the work, this implies delegation of functions, which does not relieve him of his full responsibility, this circumstance makes it necessary to supervise the work in order to be sure that the work carried out by the Helpers fulfill their objective and provide complete and adequate information.

When formulating the work program, the auditor must establish the procedures, their scope and their timeliness, but the type of company and its operational peculiarities depend a lot on this, which makes it necessary to study and evaluate the existing internal control so that based on the The results obtained clearly identify said procedures, their scope and their opportunity.

The results obtained by the auditor must be sufficient and competent, in other words, that give the moral certainty that the facts that are being tried to prove, or the criteria whose correction are being judged, have been satisfactorily verified and refers to those facts, circumstances or criteria that really matter in relation to what was examined.

Information Standards

As a consequence of its work, the auditor issues an opinion expressing the work carried out and the conclusions it has reached. This opinion is called an opinion and due to its importance, the standards that regulate its quality have been established.

AUDIT TECHNIQUES AND PROCEDURES

• Concept

Auditing techniques are the practical methods of investigation and testing that the public accountant uses to obtain the information and verification necessary to obtain the information and verification necessary to be able to express his professional opinion.

The audit procedures are: the set of investigation techniques applicable to an item or group of facts or circumstances related to the financial statements.

In other words, the techniques are the work tools of the Public Accountant and the procedures are the combination of these tools for a particular study.

• Classification of Audit Techniques

The Auditing Standards and Procedures Commission of the Mexican Institute of Public Accountants, in its bulletin F-01, has proposed the following classification: • General Study

• Analysis.Inspection.Confirmation.Research.Declarations or certifications.Certification.Calculation.

• General Study

It is the appreciation and judgment of the general characteristics of the company, the accounts or the operations, through its most significant elements to conclude it is necessary to deepen its study and the way it has to be done.

• Analysis

It is the study of the components of a whole to conclude based on those regarding it. This technique is applied specifically to the study of the accounts or generic items of the financial statements.

• Inspection

It is the physical verification of the material things in which the operations were translated, it is applied to the accounts whose balances have a material representation, (cash, merchandise, goods, etc.).

• Confirmation

It is the ratification by a person outside the company, of the authenticity of a balance, fact or operation, in which I participate and for which he is in a position to validly inform about it.

• Investigation

It is the collection of information through talks with the officers and employees of the company.

• Declarations and Certifications

It is the formalization of the prior art, when, due to its importance, it is convenient that the received statements should be written (statements) and sometimes certified by some authority (certifications).

• Observation

It is a less formal way of inspection and is generally applied to operations to verify how it is done in practice.

• Calculation

It is the verification of the arithmetic corrections of those accounts or operations that are fundamentally determined by calculations on precise bases.

• Classification of Audit Procedures

As already mentioned, the audit procedures are the grouping of techniques applicable to the particular study of an account or operation; It is practically inconvenient to classify the procedures since the experience and the criteria of the auditor decide the techniques that make up the procedure in the particular case.

• Extension or scope of the Procedures

Extension or scope is called the amplitude given to the procedures, that is, the intensity and depth with which they are practically applied.

• Procedures Opportunity

It is the time when the procedures should be applied to the study of specific games.

WORK PAPERS

• Concept

Documents prepared by an auditor that allow him to have information and evidence of the Audit carried out, as well as the decisions taken to form his opinion. Its mission is to help in the planning and execution of the Audit and in the supervision and review of the same and to provide evidence of the work carried out to argue its opinion.

They must be complete and detailed so that a normal expert auditor and without having seen said Audit, is able to find out through them to support the conclusions obtained. They must be written in such a way that the information they contain is clear and intelligible. They should provide at a glance a quick evaluation of the work done. It is the material record that the auditor keeps of the work performed, including the procedures used, tests performed, information obtained.

It must be done at the time of the work. they are the sole property of the auditor who has to guard them and keep them confidential. He teaches them to the judges who sue him and to the ICAC.

Each auditing company has its own way of working and presenting the papers, although it is not a standard way.

6.2 Significant Objectives

Consequently, the objective and importance of the working papers are:

1. In them the public accountant supports and bases his reports:
   • Observation Letter.

1. They serve as a source of information after:
   • The tax authorities, the judicial authorities, another public accountant who wishes to comment on the work performed, the client or audited entity.

1. With them the work carried out, its scope, its limitations and its opportunity are evidenced.They serve to verify that the public accountant carried out a professional quality work.They serve as a guide for the conduct of future audits and as a reference to determine the consistency in the application of generally accepted accounting principle from one exercise to another.

6.3 Elements and characteristics of working papers

6.3.1 Elements

The working papers must be clear and concise regarding the account or operation to which they refer, the work carried out and the conclusions obtained; This is achieved by establishing a minimum number of elements that should be taken into account when preparing them; The following is a list of some of the elements that must be included in any audit work document:

• Name of the company to which they refer.Date of closing of the year examined.Title or brief description of its content.Date on which it was prepared.Name of who prepared it.Sources from which the data were obtained.Concise description of the work carried out. Conclusion.

6.3.2 Features

The worksheet is the certificate that shows the groups or items that make up the financial statements.

The summary certificates show the G / L accounts that form a line item.

The detail cards list the items that make up a G / L account or any balance.

Verification cards contain the work carried out to verify the correctness of a game or operation.

• Ownership of working papers

The working papers are the property of the auditor, he prepared them and they are the material proof of the work done; But, this property is not unrestricted since, because it contains data that can be considered confidential, it is obliged to maintain absolute discretion regarding the information they contain.

That is, the work papers are the auditor's, but he is bound by professional secrecy that stipulates not to disclose for any reason the facts, data or circumstances that are known in the exercise of his profession (unless authorized by him or the interested parties and except for the reports that the respective laws establish obligatorily).

• Marks and indices

Marks of work done

In order to facilitate the transcription and interpretation of the work carried out in the audit, they usually get used to using marks that allow transcribing some repetitive works in a practical and easy-to-read way. For example; The activity of comparing figures that come from the auxiliary records against the auxiliaries themselves, can be left transcribed in the working papers, writing down a mark whose meaning is precisely that of having verified the corresponding figures against the relative auxiliary.

In practice, the use of marks of work carried out is most common and facilitates, on the one hand, the transcription of the work performed by the performing auditor, and on the other, the interpretation of said work as the review process by the supervisor.

Also in practice, because there are certain repetitive works in a constant way, it is periodically decided to establish a standard brand, that is, a brand that always means the same thing.

The shape of the marks should be as simple as possible but at the same time distinctive, so that there is no confusion between the different marks used in the work. Normally the marks are transcribed using red or blue color, so that through color their immediate identification is achieved in the games in which they were noted.

6.5.2 Indices

To facilitate their location, the work papers are marked with indexes that clearly indicate the section of the file where they must be filed, and consequently where they can be found when needed.

In general terms, the order given to them in the file is the same as that presented in the financial statement. Thus those related to cash will be first, those related to accounts receivable later, until concluding with those that refer to the expense accounts and memorandum accounts.

The indices are assigned according to the previous criteria and can be used for this object, numbers, letters or a combination of both.

Below is an example of indexes using the alphabetic-numerical method as it is the most widely used in the practice of auditing. In this system, the single letters indicate asset accounts, the double letters indicate liability and capital accounts and the tens indicate income statements:

Letter or Number	Account name
TO	Cash and banks
B Accounts receivable
C Inventories
OR	Fixed assets
W	Deferred charges and others
AA	Documents to pay
BB Accounts payable
EE Taxes payable
H H	Long-term liabilities
LL	Liability reserves
RR Deferred credits
H.H	Capital and reserves
10	Sales
twenty	Costs of sale
30	General expenses
40	Expenses and financial products
fifty	Other expenses and products.

Selective tests

The work of reviewing the accounts is not and cannot be exhaustive, it is not possible to carry out in a short period (30.45 days) with a group of three or four people, which takes the company a year with one more staff or Less abundant, but not reasonable either, the auditor has limited time to draw conclusions.

Selectively checking one thing is verifying some of its parts to conclude with respect to the whole, for example, the balance of the G / L account of customers can be considered correct when the verification of 50% of individual balances yields results in this regard.

Importance

The results of the selective tests must be carefully weighed to be able to generalize them to the whole. Satisfactory results must provide certainty, while negative results can lead to an extension of the work, either by enlarging the sample or changing the focus, or they can simply be considered fully applicable to the universe, and therefore considered erroneous.

Classification

The parts that make up the whole to be tested are called the universe and the selected parts are called the sample, the relationship between the sample and the universe depends on many factors, including internal control, the homogeneity of the items, and the characteristics same of the universe to examine. In auditing, experience is essential to determine how many and which items should be included in the sample, or otherwise, what should be the scope in the application of the procedures.

Minimum content of papers

• Evidence that the financial statements and other information, on which the worker is going to comment, are in accordance with the company's records. Relationship of liabilities and assets, showing how the auditor has evidence of their physical existence and valuation. Analysis of the income and expense figures that make up the income statement.Proof that the work was well executed, supervised, reviewed.It forms the internal control system that the auditor has carried and the degree of confidence of that system and what is the Scope performed to review substantive tests. Details of the definitions or deviations in the internal control system and conclusions reached. Details of the setbacks at work and solutions to them.

Permanent archive content

It provides auditors with basic information about clients, to understand their system more easily and they are able to refer to relevant documents, year after year.

It is convenient that it includes:

• Company deed and statute. Important board agreements. Details of the deeds of ownership. Addresses of the registered office, factories, subsidiaries, etc. fax, telephone, etc. Copy of the organization chart. Explanation of the accounting procedures of the deed. and forms used. Where are the accounting records and person responsible for them. Name and surnames of the people authorized to approve payments, etc. Signature with authority in the banks. Internal control questionnaire passed to the company. Deficiencies found. Interview with the company and small details.

SAMPLING

Attribute sampling

Attribute sampling is a statistical method used to calculate the proportion of items in a population that contains a characteristic or attribute of interest. This proportion is called the concurrency rate or exception rate and is the proportion of games that contain the specific attribute in relation to the total number of games in the population. The occurrence rate is usually expressed as a percentage.

Auditors are interested in the occurrence of the following types of exceptions in accounting data stocks:

• Deviation of the procedures of the control established by the client. Monetary errors or irregularities in the data of the operations. Monetary errors or irregularities in the details of the balances in the accounts.

Knowing the rate of occurrence of such exceptions is useful for the first two types of exceptions, which are related to operations. Auditors use attribute sampling extensively to perform tests of controls and substantive tests of operations. With the third type of exceptions, the auditor generally needs to calculate the total number of exceptions in pesos, because a judgment must be made as to whether the exceptions are material. When the auditor needs to know the total amount of an error, he uses variables or sampling of monetary units.

The occurrence or exception rate of a random or systematic sample is a calculation without deviations from the exception rate of the entire population. It means that for a given sample, the sample exception rate is the auditor's best estimate of the population exception rate. The term exception is understood as something that refers both to deviations from the prescribed control procedures and to situations where the amounts are not correct either due to a non-functional accounting error or any other cause. The term deviation refers to a specific type of exception to a deviation from prescribed control procedures.

Suppose the auditor determines the percentage of sales invoices that do not have shipping documents attached. There is an actual, but unknown, percentage of missing shipping documents. The auditor will obtain a sample of copies of sales invoices and determine what percentage of invoices do not have shipping documents attached.

The auditor will conclude that the sample exception rate is the most likely calculation of the population exception rate.

Given that it is based on a sample, however, there is a significant probability that the sample exception rate and the exception rate of the real population will differ. Statistical methods allow the auditor to indicate the extent to which the two exception rates are likely to differ and the reliability of the calculation. The former is called precision and the latter the risk of sampling. So once the sample exception index is calculated, the auditor will determine the precision of the calculation, add it and subtract it from the population exception index. The auditor will conclude that the calculation of the interval contains the real exception rate of the population at a certain sampling risk.

By using attribute sampling in the audit, the auditor is primarily interested in knowing what the highest exception rate would be. Thus, the auditor will focus on the upper level of the interval calculation. This limit is called the calculated top exception index. In tests of controls and in substantive tests of operations.

Variable sampling

Variable sampling is used to measure the amount of a universe. For audit purposes, the objective of variable sampling is to measure the true amount of the error in an account balance, or, conversely, the same correct account balance in order to verify that the account balance contains errors that exceed a tolerable amount.

Measurements taken with sampling by variables are called estimates by variables. These estimates are in the form of an interval estimate. This is a range of values ​​determined by an estimate of money points plus or minus a precision interval at the desired confidence level. It is common to calculate both an upper and a lower confidence limit for these intervals, because a balance in an account is undervalued or overvalued. These intervals are called confidence intervals. The confidence limits in the sampling by variables are similar with the MUM (Sampling of Monetary Units), in general they are more precise.

Variable sampling is more useful for substantive testing than attribute sampling, because auditors are generally more interested in the monetary amount of errors than in frequency. Variable sampling is more useful than MUM when a measure of the amount of error is needed to make an audit adjustment. To illustrate this, suppose that in the confirmation of accounts receivable, the auditor uses attributes, the MUM, or the sampling by variables. If attribute sampling were used, the auditor could only decide that a certain percentage of the accounts contain errors, regardless of the amounts of individual errors in the sample. If the MUM is used, the auditor decides what the maximum number of such errors is. But if you use variable sampling,An interval estimate is obtained that could be taken into account both in terms of amount and used as the basis for an audit adjustment.

The result is generally used in the sampling of attributes in substantive tests only when few exceptions are expected, and the cost of the MUM and sampling by variables are prohibitive. MUM is used when practical and few or no exceptions are expected. Variable sampling is used when practical and more than a few exceptions are expected, or an accurate estimate of the dollar amount of exceptions or the true balance of an account is required.

Statistical sampling in cumulative reports

Sampling in the audit consists of applying a compliance or substantive procedure to less than all of the items that make up the balance of an account or class of transactions that allow the auditor to obtain and evaluate the evidence of some characteristic of the balance or Of the transactions that allow you to reach a conclusion in relation to such characteristic, the selection technique for audit sampling is based on random or random selection, which is what ensures that all items within the universe or within each stratum they have the same possibility of being selected as it is in the case of the use of the tables of random numbers.

Random selection can take different modalities among which we have:

Systematic selection:

Consisting of the selection of games by using a constant interval between one selection and another, the initial interval having a randomly selected starting point, the interval can be based on certain number of games or monetary totals. When using the auditor, this systematic selection must determine that the universe is not structured in such a way that the sampling interval corresponds to a particular pattern of said universe.

The casual selection:

This could be an alternative to random selection as long as the auditor tries to obtain a representative sample of the total universe with no intention of including or excluding specific units.

When designing an audit sample, the auditor will consider the following aspects to define it:

The Audit Objectives

The auditor should first consider the specific audit objectives to be achieved, which will enable him to determine the most appropriate audit procedure or combination of procedures to achieve those objectives. Furthermore, when audit sampling is appropriate, the nature of the audit evidence sought, and the conditions of possible error or other characteristics relating to such evidence will assist the auditor in defining what constitutes an error and the universe to be used for sampling.

The universe

This is the name of the data body where the auditor wants to extract samples to reach a conclusion, and the auditor should determine that the universe where the sample is drawn is appropriate for the specific objective of the audit.

The line items that make up the universe are known as sampling units to obtain an effective and efficient sample that allows you to achieve the particular audit objective.

In determining the universe, stratification is recommended, which consists of dividing the universe into sub-universes, that is, into a group of sampling units with similar characteristics. The strata must be explicitly defined so that each sampling unit can belong to a single stratum. Stratification allows the auditor to direct his efforts towards the items that he considers potentially contain the greatest monetary error.

Risk and certainty

In scheduling the audit, the auditor uses his professional judgment to determine the appropriate level of audit risk.

Audit risks include:

• The risk of significant errors also known as inherent risk The risk that the client's internal accounting control system will not prevent or correct such errors also known as control risk The risk of any other significant errors not being detected by the auditor also known as detection risk.

The auditor's objective should be to reduce risk outside of sampling to a minimum level through appropriate planning, management, supervision and review.

Tolerable error

It is the maximum error in the universe that the auditor would be willing to accept and still conclude that the sampling result has reached its audit objective. The tolerable error is considered during the planning stage and relates to the auditor's preliminary judgment regarding importance. The less tolerable the error, the larger the sample that the auditor will require.

In compliance procedures the tolerable error is the maximum percentage deviation from a prescribed control procedure that the auditor would be willing to accept without altering the degree of confidence that he planned to place in the control that he is testing. In the case of substantive procedures, the tolerable error is the maximum monetary error in the balance of an account or transaction that the auditor would be willing to accept so that when considering the results of all the audit procedures, the auditor is in a position to conclude with reasonable security, that the financial information does not contain important errors.

Expected error in the universe

If the auditor expects the presence of the error, it will normally have to examine a larger sample to conclude that the value of the universe is reasonably presented within the estimated tolerable error or that the confidence that was planned to be placed in a significant control is justified, the samples of larger sizes are justified when the universe is expected to be error-free. In determining the expected error in a universe, the auditor should consider issues such as levels of error identified in previous audits, changes in client procedures, and available evidence of its evaluation of the internal accounting control system and the results of analytical review.

AUDIT REPORT

• Basic elements of the Audit Report

The final materialization of the work carried out by the independent auditors is documented in the audit opinion, report or opinion. In addition, for those entities subject to legal audit, this document together with the annual accounts for the year form a unit, being mandatory to proceed to the deposit of annual accounts in the Commercial Registry that includes the report issued by the Company's auditors, together with the accounts signed by all the administrators (or the express indication of non-subscription of the accounts) and approved by the General Meeting of Shareholders of the Company; To give more credibility to the entire procedure, it is also required to deposit a certification of the minutes of the General Meeting that approved the accounts, with the signatures of the person who issues it legitimately by notary.

The independent audit report must contain, as a minimum, the following basic elements:

• The title or identification. Who is it for and who ordered it. The "Scope" paragraph. The paragraph of "Opinion". The paragraph or paragraphs of "Emphasis". The paragraph or paragraphs of "Caveats". The paragraph on the "Management Report". The signature of the report by the auditor. The name, address and registration data of the auditor The date of the report The legal or comparative paragraph

The title or identification

The report should be identified under the title "Independent Audit Report of Annual Accounts", so that any reader or user of the report can distinguish it from other reports that the auditor may issue as a result of special work, limited reviews or reports prepared by persons other than auditors, such as reports from Management or from other internal bodies of the entity. Therefore, that title will only be applied by the auditor to examination-based reports intended to express an opinion on the financial statements as a whole.

Curiously, in the standardized reporting models that accompany the Spanish NTAs, the title of the different reporting models is the Annual Accounts Audit Report, and the term Independent does not appear in any case.

Who is it for and who ordered it

The auditor shall address his report to the person or body of the entity from which he received the audit request. Normally, the auditor's report will be addressed to shareholders or partners. In this case, when the work has been commissioned by the General Shareholders' Meeting and the report is addressed to it (to the shareholders), the specification that the commission was carried out by said General Meeting may be omitted. Sometimes the report is addressed to the administrators or the audit committee, although this will normally happen if it is a voluntary audit.

The scope paragraph

This paragraph, which is intended to describe the extent of the audit work performed, should clearly:

• Identify the audited financial statements. Therefore, it must include the name of the entity, the financial statements under review, the balance sheet date and the period covered by the other statements.Refer to compliance in the examination of generally accepted auditing standards (NAGA), which In this context, it is understood that they are generally accepted in Spain. If, by special request, the work has been carried out in accordance with generally accepted auditing standards in another country, the auditor may issue a report in accordance with the standards in force and in the usual language in that country, always indicating in his report the origin of the same and, if such standards used do not meet the minimum requirements of the NAGA, mentioning in the paragraphs of scope and opinion of the requirements not met.

The standard text of the scope paragraph without qualifications will be drawn up, in accordance with ICAC Bulletin 14, in the following terms.

If the auditor does not mention any limitation or qualification in the scope paragraph, it will be understood that he has carried out all the audit procedures and tests necessary to express his opinion on the entity's financial statements. Otherwise, you must state that there have been limitations to the scope of your examination, which will be stated as follows: «except for the exception mentioned in paragraph x below, the work has been carried out in accordance with the auditing standards generally accepted (…) ». We must anticipate that the qualifications in general are referenced in the report by the words EXCEPT FOR.

We note that in this scope paragraph it is only expressed if there have been no scope limitations (in which case nothing is said, that is, the previous standard paragraph is used) or if, on the contrary, there have been limitations, in which case, it is only mentioned that they have existed, but nothing is said about what kind of limitations or what audit procedures have been stopped due to the limitation or limitations; Such information will be written in one or more paragraphs of qualifications.

8.1.4 The opinion paragraph

The opinion paragraph of the Independent Audit Report must clearly show the auditor's final judgment on whether or not the annual accounts, considered in all significant respects, adequately express the true image of the following aspects of the audited entity:

• Of the financial situation (reference to the liabilities of the balance sheet), Of equity (reference to the assets of the balance sheet), Of the results of operations (reference to the profit and loss account), and Of the resources obtained and applied during the year (reference to the annual financing table).

All this within a framework of generally accepted accounting principles and standards (PyNCGA). In other words, opinion refers to the degree of compliance with pre-established standards. Likewise, it must express whether the PyNCGA have been uniformly applied.

This paragraph will also say whether the annual accounts contain the necessary and sufficient information for their proper interpretation and understanding. The aforementioned information must be identified with the minimum mandatory information that orders the specifically applicable regulations to be published.

Also in the opinion paragraph, the auditor shall state, where appropriate, the nature of any significant qualification regarding the annual accounts. When this circumstance occurs, the expression "except for" must be included. When the qualification or qualifications are very significant, the auditor must deny his opinion or express an unfavorable opinion.

We must remember that the opinion expressed in the opinion paragraph is about the annual accounts only, which we remember are the balance sheet, the profit and loss account and the memory; This last document will include - in its non-abbreviated format - the financing table, and optionally the analytical profit and loss account and the statement of changes in cash.

However, on occasions, the management report must also accompany the audit report and the auditor must also express an opinion on it, but such opinion is expressed only on certain aspects of it (the accounting information it contains), and mentioned in a different paragraph (the paragraph on the management report), which will be analyzed later.

The standard text of the opinion paragraph without qualifications will be drawn up, in accordance with ICAC Bulletin 14, in the following terms.

The paragraph (or paragraphs) of emphasis

Through the emphasis paragraphs, the auditor reveals those facts that he considers relevant or of special importance, although such facts do not affect the opinion.

Therefore, when an emphasis paragraph appears in an audit report, the auditor thus intends to highlight to the reader that specific fact, which he considers to be of special importance for the Company, although this does not mean that the audit opinion should include any qualification. Therefore, an emphasis paragraph should never be confused with one of qualification.

Some common reasons why the auditor often includes emphasis paragraphs in their audit report are:

Due to the need to demonstrate that a significant percentage of operations (purchases or sales) are being carried out with a specific entity. ü Qualifications revealed in previous reports and corrected in this exercise; given that as they have been corrected in this exercise, their inclusion as a qualification in this exercise does not apply, however, and given the importance that this circumstance had in previous reports (therefore, it was included as a qualification), they are included in this paragraph. of emphasis. Normally such corrections will have been made using accounts 779. income and profits from previous years or 679. expenses and losses from previous years, which is also a reason for special mention in the report through the emphasis paragraph.

Insurance coverage defect on the Company's fixed assets. Although this fact has no effect on the Company's financial statements, the auditor may consider this important circumstance to make it manifest.

No exceptional application of any PYNCGA (with which the auditor agrees), since its application would prevent the faithful image from being shown. If the auditor is not satisfied with the non-application, it will give rise to a qualification or a negative opinion.

The extraordinary results include expenses or income corresponding to previous years, and they are significant.

An emphasis paragraph will never be referenced in the audit report by the expression "except for" as it expresses a fact or circumstance that does not affect the audit opinion in any way.

The paragraph (or paragraphs) of qualifications

When the auditor has to show in his report that there are some objections in relation to the financial statements formulated by the Company, he uses the paragraph (or paragraphs) of qualifications, in which the reasons for his objections must always be justified, quantifying the impact this qualification has on the audited financial statements (provided the qualification is quantifiable); If the effect of the qualification is not capable of being reasonably estimated or quantified, only the causes that provoke such qualification will be mentioned.

It is usual and logical that the auditor collect the caveat or caveats sufficiently explained and detailed, since they are normally caused by differences in criteria or interpretation that, given the same fact or circumstance, occur between the administrators or their advisers and the auditor or audit firm itself.

The qualifying paragraphs are placed between the scope paragraph and the opinion paragraph, so they are also called intermediate paragraphs. A caveat paragraph should never be confused with an emphasis paragraph. The fact collected in a paragraph of qualifications affects opinion, the one reflected in an emphasis paragraph does not.

The paragraph on the management report

The management report is not an integral part of the annual accounts of a company. However, for those companies subject to a mandatory audit, it must be formulated and deposited together with their annual accounts. This means that, either by legal imperative or by the desire of the company, in certain situations the auditor is obliged to analyze the content of the management report, although the auditor's responsibility for the content of said report reaches only what is concerned. to the accounting information that such management report may contain and not the non-accounting information that administrators have included in it.

According to ICAC Bulletin No. 14, which slightly modifies the wording of the audit report, the paragraph to be included in the auditor's opinion, regarding the management report, will be as follows:

This paragraph contains an independent opinion in which the auditor states that the accounting information in the management report does agree with that of the financial statements for the year; however, the accounting information in said report may be incorrect, in which case we understand that the auditor will express an opinion that will be similar to the qualified opinion on the annual accounts; A possible wording of this type of event may be: "We have verified that the accounting information contained in the aforementioned management report agrees with that of the annual accounts for the 20XX financial year, except for (… indicate the non-concordance…)"

The signature of the report by the auditor

The report must be signed by an auditor registered in the Official Register of Account Auditors (ROAC). In the case of reports corresponding to audits carried out by audit firms registered in said Registry, the report must indicate:

NAME OF THE SOCIETY

Signature of the partner or partners

Name of the signing partner or partners

The name, address and registration details of the auditor

Regardless of the name of the auditor, the report must show, what is normally done as a letterhead, the address and the city where the auditor's office is located and its registration number in the ROAC. If this number does not appear on the letterhead, it must be stated together with the name of the auditor.

The date of the report

The auditor's report must state a date. The date of the report must be that of the last day of work in the entity's offices, since by this date it will have completed its audit procedures. In this regard, we must bear in mind that the auditor must obligatorily consider the effect that the events and transactions that have occurred and become known to him before the time of delivery of the report to the entity may have in the financial statements and in his report. audited.

Therefore, although the audit report contains the professional opinion on the reasonableness of the financial statements of the audited year, the auditor in his report also opines on the existence (or nonexistence) of significant events that have occurred since the end of the year to date. delivery of the report.

In these special cases in which the auditor obtains new evidence between the date of completion of the work and the date of delivery of the report, if this evidence affects the content of the report, he may set two different dates, one for the content of the report and another for the evidence in question.

The legal or comparative paragraph

According to NTA 3.9.3. Drafted according to Resolution of December 1, 1994, of the ICAC (BOICAC nº 19), when the Audit Report refers to the annual accounts of a financial year, it must include a paragraph, after the scope paragraph, that makes mention of the fact of that the audited accounts are only those of the last fiscal year.

In accordance with Spanish commercial law, the annual accounts for a year include, for comparative purposes, the balance sheet figures, the profit and loss account and the financing table corresponding to the previous year. When only comparative figures from the previous year are presented and not full annual accounts, the auditor must indicate, in an intermediate paragraph, that his opinion refers exclusively to the last year.

When the entity had been subject to a mandatory audit in the previous year, the auditor must also indicate whether it was he who carried out said audit or, if not, indicate that it was carried out by another auditor, the date of issue of the report and the type of opinion issued (favorable, qualified, unfavorable or denied).

If the company voluntarily audited the annual accounts for the previous year, the indications to said voluntary audit report may be omitted. In the latter case, the auditor should require the entity to identify as "not subject to mandatory audit" the figures for the previous year included in the annual accounts for comparative purposes.

When the company has not audited the annual accounts for the previous year and has not been required to do so, it will identify the comparative figures as unaudited. However, when the company has breached the obligation to undergo an audit in the previous year, this fact must be mentioned in the audit report.

Objectives, characteristics and statements contained in the audit report

The objective of the financial audit report is to express a technical opinion on the annual accounts in significant or important aspects, on whether they show the true image of the assets, the financial situation and the result of its operations, as well as the resources obtained and applied during the exercise.

Features of the audit report

• It is a commercial or public document. It shows the scope of the work. It contains the auditor's opinion. It is carried out in accordance with a legal framework.

Main statements contained in the report

• It indicates the scope of the work and whether it has been possible to carry it out and in accordance with which auditing standards. It expresses whether the annual accounts contain the necessary and sufficient information and have been formulated in accordance with current legislation and, also, if said accounts They have been prepared taking into account the accounting principle of uniformity. It also expresses whether the annual accounts reflect, in all significant aspects, the faithful image of the patrimony, the financial situation, the results and the resources obtained and applied. He also thinks about the consistency of the accounting information in the management report with that contained in the annual accounts. In his case, he explains the deviations presented by the financial statements with respect to pre-established standards.We can summarize that the report is a public presentation, summarized and in writing, of the work carried out by the auditors and their opinion on the annual accounts.

Types of opinion

There are four types of audit opinion:

• Favorable Opinion, Qualified Opinion, Unfavorable Opinion, Denied Opinion.

A favorable, fair or unqualified opinion means that the auditor agrees, without reservation, on the presentation and content of the financial statements.

The qualified opinion (also called in the audit jargon as qualified or qualified opinion), means that the auditor agrees with the financial statements, but with certain reservations.

The unfavorable opinion or adverse or negative opinion means that the auditor disagrees with the financial statements and affirms that they do not adequately present the economic-financial reality of the audited company.

Finally, the denied opinion, or abstention of opinion means that the auditor does not express any opinion on the financial statements. This does not mean that you disagree with them, it simply means that you do not have sufficient elements of judgment to form any of the three previous types of opinion.

Favorable opinion

A favorable, fair, positive, or unqualified opinion states that the auditor has been satisfied, in all material respects, that the financial statements subject to the audit meet the following requirements:

• They have been prepared in accordance with generally accepted accounting principles and criteria, which are consistent with those applied in the previous year. They have been prepared in accordance with the statutory and regulatory norms and provisions that are applicable to them and that significantly affect the proper presentation of the financial situation, the results of operations and changes in the financial situation. Together, they give a vision that is consistent with the information available to the auditor about the entity's business or activities. They adequately inform everything that can be meaningful in getting an appropriate presentation and interpretation of financial information.

The standard text of the opinion paragraph without qualifications will be drafted in the following terms (ICAC Bulletin nº 14):

Qualified opinion

(or qualified, with reservations or with exceptions)

This type of opinion is applicable when the auditor concludes that there are one or more circumstances in relation to the annual accounts taken as a whole, which could be significant. Different treatment requires those cases in which this type of circumstances, being very significant, prevent the annual accounts from presenting the true image or does not allow the auditor to form an opinion on them.

Next, we turn to study the different circumstances that can give rise to a qualified opinion.

Scope limitations

There is a scope limitation when the auditor cannot apply one or more audit procedures or they cannot be practiced in full; Likewise, the procedures not practiced are considered necessary to obtain audit evidence, in order to satisfy that the annual accounts present the faithful image of the audited entity.

Within the scope limitations, we must differentiate between two types:

• Those that come from the audited entity (imposed limitations) Those that are caused by the circumstances (supervening limitations).

Among the first, we can refer, by way of example, to the entity's refusal to provide us with certain information or to allow us to practice certain audit procedures (for example, the confirmation of customer balances).

Among the second, we could include the accidental destruction of documentation or records necessary for the audit, or the impossibility of witnessing physical inventory counts due to having been appointed auditors after the end of the fiscal year.

Notwithstanding the foregoing, if there are alternative methods to obtain sufficient evidence, the auditor should apply these methods (as long as the audited entity provides the necessary information for the application of these alternative tests), in order to eliminate the limitation initially found.

Faced with a scope limitation, the auditor must decide whether to deny the opinion or to issue it with qualifications, which depends on the importance of the limitation. For this we must take into consideration:

• The nature and significance of the potential effect of the omitted procedures, and The relative importance of the affected account or accounts.

In an audit report, a scope limitation has an effect on the Scope Paragraph and on the Opinion Paragraph, given that we must highlight not only this circumstance in the opinion, but in the scope of our work we must leave evidence of the impossibility (limitation) of doing part of the work. According to the ICAC Bulletin nº 14, the effect of the limitations to the scope will be written in the following terms:

«We have audited the annual accounts of XYZ, SA, which comprise the balance sheet as of December 31, 20XX, the profit and loss account and the report corresponding to the year ended on that date, whose formulation is the responsibility of the administrators of the Society. Our responsibility is to express an opinion on the aforementioned annual accounts as a whole, based on the work done. Except for the exception mentioned in paragraph X, the work has been carried out in accordance with generally accepted auditing standards, which require the examination, by means of selective tests, of the supporting evidence of the annual accounts and the evaluation of their presentation of the accounting principles applied and the estimates made. "

The scope limitation will be clearly described, mentioning the procedure or procedures that could not be applied.

“In our opinion, except for the effects of those adjustments that could have been considered necessary if we had been able to verify (make an explicit reference to the limitation (s) set forth in paragraph X above), the annual accounts of the 20XX exercise attached express, in all significant respects, the faithful image

An uncertainty is defined as a matter or situation whose final outcome is not certain at the balance sheet date, depending on whether or not a future event occurs; therefore, the entity cannot reasonably estimate, and therefore cannot determine, whether or not the annual accounts should be adjusted.

Claims, litigation, lawsuits, doubts about the continuity of the company due to various circumstances (continued operating losses, lack of liquidity, inability to obtain sufficient financing, etc.) and tax contingencies are some of the examples of uncertain matters or situations whose final outcome cannot be estimated and are therefore uncertainties.

However, the normal estimates that future entities have to make in preparing their annual accounts, such as actuarial estimates of pension plans, provisions for bad debts, provisions for guarantees or returns, value should not be classified as uncertainty. of stock, etc. In these cases it is feasible to make a reasonable estimate, either at a specific or global level, and an uncertainty means the inability to make a reasonable estimate due to reliance on future events in which there is an unpredictable degree of randomness.

According to the ICAC Bulletin nº 14, the effect of the Uncertainties will be written in the following terms:

No mention is made of this circumstance.

Uncertainty will be clearly described.

“In our opinion, except for the effects of any adjustment that might be necessary if the final outcome of the uncertainty described in the previous caveat were known, the accompanying 20XX annual accounts express, in all significant respects, the faithful image of the equity and financial situation of the Company XYZ SA as of December 31, 20XX and the results of its operations and the resources obtained and applied during the year ended …….

Mistakes

Errors or breaches of generally accepted accounting principles and standards The annual accounts must express the faithful image, in accordance with generally accepted accounting principles and standards. Therefore, during the performance of the work, circumstances may arise that suppose a breach of the aforementioned principles.

The errors that may occur are the following:

• Use of accounting principles and rules different from those generally accepted. Errors, whether or not intentional, in the preparation of the annual accounts. These include arithmetic errors, errors in the practical application of accounting principles and standards, and errors in the interpretation of facts. The annual accounts do not contain all the information necessary and sufficient for their proper interpretation and understanding. This circumstance includes both a defect in the disclosures required in the Report and the inadequate presentation of the accounts in terms of their format and classification. Events after the year-end date whose effect had not been corrected in the annual accounts or adequately broken down in the Report, as appropriate.

Therefore, when the auditor observes any of the foregoing circumstances, he shall evaluate and, if possible, quantify its effect on the annual accounts, so that if he concludes that these events could be materially significant, he must express an opinion. with qualifications, or, in the event that the annual accounts do not present the faithful image, an unfavorable opinion.

According to ICAC Bulletin nº 14, these facts will be revealed in the report in the following terms:

No mention is made of this circumstance.

The qualifications revealed will be described, as well as their effect on the balance sheet and on the profit and loss account will be quantified.

"In our opinion, except for the effects of the qualification described in paragraph X above, the accompanying 20XX financial statements express, in all material respects, the true image of the assets and financial situation of the XYZ SA Company at December 31, 20XX and the results of its operations and the resources obtained and applied during the year ended on that date and contain the necessary and sufficient information for their proper interpretation and understanding, in accordance with generally accepted accounting principles and standards that are consistent with those applied in the previous exercise. "

Changes, during the year, of accounting principles and rules, compared to those applied in the previous year

The objective of uniformity is to ensure that the accounts of different years have not been significantly affected by changes in the application of accounting principles and standards.

When there has been a change in the accounting principles and standards or in the method of their application that significantly affects the comparability of the annual accounts, the auditor must expressly mention in the opinion paragraph of his report that there is a qualification uniform application of accounting principles and standards.

The reasons that may lead to change certain valuation criteria may be justified or, on the contrary, stem from fiscal causes (need to declare lower or higher tax benefits than those obtained), or from causes related to the need to obtain a certain benefit. accountant.

Regardless of whether or not the auditor agrees with the change, this fact will affect the result of the year, so it must be revealed in the audit report.

If the auditor concludes that the new accounting principle adopted is not generally accepted or is not justified, the auditor would be faced with a case of non-compliance with generally accepted accounting principles and standards, and would include the corresponding qualification in his report (as stated in the case of qualifications for errors or breach of accounting principles).

If, on the other hand, there had been a justified change in the materially significant accounting principles and standards, an intermediate paragraph will not normally be included in the report, and the reference to the Explanatory Note to the Report detailing the change and quantifying the effect.

Therefore, according to BOICAC nº 14, the effect that these circumstances will have on the audit report, provided that these events are materially significant, will be:

In the event that the auditor agrees with this change:

No mention is made of this circumstance.

Usually no mention will be made of this fact.

"In our opinion, the accompanying 20XX annual accounts express, in all material respects, the true and fair view of the assets and financial situation of the XYZ SA Company as of December 31, 20XX and the results of its operations and resources obtained and applied during the year ended on that date and contain the necessary and sufficient information for their interpretation and adequate understanding, in accordance with generally accepted accounting principles and standards that, except for the change (a brief description will be made of it), as described in Note X to the report, with which we agree, are consistent with those applied in the previous exercise. »

If the auditor does not agree with the change in uniformity

No mention is made of this circumstance.

The exceptions (s) revealed (the change in uniformity) will be described, as well as their effect on the Balance Sheet and on the Profit and Loss Account will be quantified.

"In our opinion, the accompanying 20XX annual accounts express, in all significant respects, the true image of the assets and financial situation of the XYZ SA Company as of December 31, 20XX and the results of its operations and the resources obtained and applied during the year ended on that date and contain the necessary and sufficient information for their proper interpretation and understanding, in accordance with generally accepted accounting principles and standards that, except for the exception described in paragraph X above, are kept uniformity with those applied in the previous exercise. "

When the auditor's report refers to the annual accounts of two or more years, uniformity in the application of accounting principles and standards shall be understood as referring to the years presented. In the event that such uniformity exists, the auditor's opinion in this case will not say »… in accordance with generally accepted accounting principles and standards that are consistent with those applied in the previous year.», But will say «… in accordance with generally accepted accounting principles and standards applied uniformly. "

Unfavorable opinion (negative or adverse

An unfavorable opinion implies manifesting itself in the sense that the annual accounts taken as a whole do not present the true image of the assets, the financial situation, the result of operations or changes in the financial situation of the audited entity, in accordance with generally accepted principles and standards.

For an auditor to express an opinion such as the one indicated, it must have identified errors, non-compliance with generally accepted accounting principles and standards, including defects in the presentation of information, which, in his opinion, affect the annual accounts in a very significant amount or concept or in a large number of chapters that make it conclude unfavorably.

If, in addition to the circumstances that give rise to the unfavorable opinion, there are uncertainties or changes in generally accepted accounting principles and standards, the auditor should detail these qualifications in his report.

Therefore, an audit report with an unfavorable opinion will be drawn up, in accordance with BOICAC nº 14, in the following terms.

No mention is made of this circumstance.

The qualification (s) revealed will be described, and their effect on the Balance Sheet and on the Profit and Loss Account will be quantified, where appropriate, or the information omitted in the annual accounts that are necessary for their proper interpretation and understanding.

«In our opinion, given the importance of the effects of the qualification described in paragraph X above, the attached 20XX financial statements DO NOT EXPRESS the true image of the equity and financial situation of the XYZ SA Company as of December 31, 20XX and the results of its operations and the resources obtained and applied during the year ended on that date, in accordance with generally accepted accounting principles and standards. "

Denied Opinion (abstention of opinion)

When the auditor has not obtained the necessary evidence to form an opinion on the annual accounts taken as a whole, he must state in his report that it is not possible for him to express an opinion on them.

The need to deny the opinion may arise exclusively from:

• Limitations to the scope of the audit and / or uncertainties of very significant importance that prevent the auditor from forming an opinion.

Notwithstanding the foregoing, although the auditor may not express an opinion, he must mention, in a paragraph other than the opinion, any qualification that due to error or non-compliance with the generally accepted accounting principles and standards or changes in them would have been observed during the performance From his job.

An audit report with opinion denied due to scope limitations will be drawn up, in accordance with BOICAC nº 14, in the following terms.

«We have audited the annual accounts of XYZ, SA, which comprise the balance sheet as of December 31, 20XX, the profit and loss account and the report corresponding to the year ended on that date, whose formulation is the responsibility of the administrators of the Society. Our responsibility is to express an opinion on the aforementioned annual accounts as a whole, based on the work done. Except for the qualification mentioned in paragraph X (in this paragraph the scope limitation will be described), the work has been carried out in accordance with generally accepted auditing standards, which require examination, through selective tests, of the supporting evidence of the annual accounts and the evaluation of their presentation,of the accounting principles applied and the estimates made. "

The scope limitation will be clearly described, mentioning the audit procedures that it has not been possible to apply.

“Due to the great importance of the limitation on the scope of our audit described in paragraph X above, we cannot express an opinion on the accompanying 20XX financial statements.

An audit report with opinion denied due to uncertainty will be drawn up, in the following terms.

No mention is made of this circumstance.

Uncertainty will be clearly described.

"Due to the great importance of the limitation on the scope of our audit described in paragraph X above, we cannot express an opinion on the accompanying 20XX annual accounts."

Partial opinion is not allowed: if the auditor refrains from giving his opinion, he cannot affirm at the same time that, despite the denial of opinion, certain things are fine, which could give the distorted view that some things are Bad, but a large majority is fine, which would confuse the report user.

In any case, the non-admission of a partial opinion in the annual accounts report should not be confused with the issuance of a partial report or limited review, in which the auditor is limited to verifying a certain part of the annual accounts.

Likewise, when classifying each of the above circumstances as not significant, significant or very significant, the auditor will have to apply the Standard

Audit Technique on Relative Importance, which contains an orientation table to help the auditor in this process; Said table is based, in general terms, on comparing the numerical amount of the circumstance to be evaluated with a certain magnitude of the audited entity and estimating what percentage it represents over it. Therefore, the aforementioned table can only guide in the evaluation of quantitative aspects and is not valid for qualitative aspects.

The choice of the appropriate amount (for example, own funds or total assets), as well as the choice of the situation in which the client-entity is located, from among those offered in the table, must be made with a criterion of rationality. Usually, the range of fluctuation 3-5% of the key or chosen magnitude is managed among auditors, as an indicator of the relative importance of each circumstance considered individually.

According to the NTA on reports, significant aspects are understood to be those that exceed the levels or figures of relative importance applied at work. The levels or figures of relative importance and the reasons that justify and endorse them must be determined in the working papers where the global audit plan is recorded.

However, it may not be advisable to apply only the table to catalog each situation, but, on the contrary, and in accordance with the technical standard, the classification of such circumstances must be based on the experience and professionalism of the auditor, who must take into account such aspects. such as the sector of activity in which the company operates, the existence of one or more circumstances to classify, etc.

AUDIT CLASSIFICATION

From the public accounting point of view, the audit is classified into:

• External audit Internal audit Government audit Financial audit Operational audit

External audit: It is an examination of financial statements made in order to form an impartial opinion on objective bases.

Internal audit: It is an independent evaluating function established within an organization in order to examine and evaluate its activities, as a service to the organization.

Government audit: It is the study of efficiency and economy in the use of resources; for example the government team.

Financial audit: It is a systematic examination of the financial statements, records and corresponding operations to determine compliance with GAAP of the administration's policies and the established requirements.

Operational audit: It is the systematic examination of the activities of an organization or a stipulated segment of them in relation to specific objectives, in order to evaluate behavior, indicate opportunities for improvement and generate recommendations for improvement or to favor action.. The computerized examination of a company, the evaluation of its effectiveness and reliability and the recommendations for the improvement of the system.

AUDIT OF FINANCIAL STATEMENTS

• Concept

Represents the examination of the financial statements of an entity, in order for the independent public accountant to issue a professional opinion regarding whether these statements present the financial situation, the results of operations, changes in stockholders' equity and changes in the financial situation of a company, in accordance with generally accepted accounting principles.

• Classification of the Accounting Audit or Financial Statements.

From the point of view of the mental independence of the people who practice it

Internal Audit: it is generally practiced by officials or employees of the same company in which it is performed and is used to correct and improve internal control, setting a course of action to be taken.

External Audit: is the review carried out by an independent public accountant that meets the necessary technical requirements and moral qualities.

From the point of view of the periodicity in which they are practiced:

• Periodic, sporadic.

Periodic Audit: they are carried out on certain dates:

Continuous Audit: they are those that are systematically carried out, that is, as operations are carried out, or short or irregular intervals.

Sporadic Audit: These are not influenced by the term or continuity, but the need to examine at any given time.

From the point of view of the extent of the audit evidence:

• Of financial statements Complete or detailed.

Audit of Financial Statements: refers to the verification, verification and estimation of the accounts of the Statement of financial position and that of results.

It is so named because within the Statement of Financial Position are the income accounts that are grouped in the income statement for the year.

Complete or detailed audit: it is the review of all the operations carried out in the company, generally when they lack a good accounting system.

In this audit, the movements are reviewed and the balances are determined at the same time, in case it is not accepted in practice due to its high cost.

From the point of view of the area covered by the Audit

Special Audit: It is the review carried out on an account or a group of accounts, a statement or any other accounting element, as it is the intervention for a specific purpose of an independent part of accounting.

• Purposes and use of the Financial Statements Audit

The purposes of the Audit are:

• Determine if the financial situation and the results of a company, reflected in the accounting are reasonably correct. Discover fraud or embezzlement. Discover errors. Use of the Audit of Financial Statements.

It allows business owners to receive an opinion about the financial situation of the business from a totally impartial person outside the company.

When the sale of the business is projected, the buyer and the seller will have reasonable information regarding the financial situation.

Provide Credit Institutions with the necessary information to grant their credits.

In case of suspension of payments or bankruptcies, to know that the financial situation that is determined is reasonably correct.

For the implementation of internal control and inspection systems or the improvement of those already in place.

To establish cost systems that are in accordance with the needs of the company.

So that losses can be determined after accidents or thefts.

So that the causes of variations between the results of one exercise and another can be determined.

To determine if the tax obligations to which the company is subject have been fulfilled.

That responsibilities can be determined and the necessary measures be taken in the event of fraud or embezzlement.

In order to determine if the efficiency of the personnel and to be able to take measures of encouragement or reprimand.

In case of merger of companies, to determine the conditions under which the merger must be carried out.

So that people interested in making an investment in the company have the necessary data to study the advantages and disadvantages of said operation.

So that in the event of the death of a partner, their heirs can easily determine the amount of their rights and obligations in relation to the company.

INTERNAL CONTROL

Background and origin

In the towns of Egypt, Phenicia, Syria among others, we observe single-entry accounting. In the Middle Ages accounting books appeared to control business operations, it is in Venice where in 1494, the Franciscan Fray Lucas Paccioli or Pacciolo, better known as Lucas di Borgo, wrote a book on double-entry accounting.

It is in the industrial revolution when the need arises to control the operations that due to their magnitude were carried out by machines operated by several people.

It is thought that the origin of internal control arises with the double entry, which was one of the control measures, but it was not until the end of the 19th century that businessmen were concerned with forming and establishing adequate systems for the protection of their interests

In general, we can affirm that the consequence of the economic growth of business implied greater complexity in the organization and therefore in its administration.

Concept

Internal Control is the base where the activities and operations of a company rest, that is, that the activities of production, distribution, financing, administration, among others are governed by internal control.

It is an instrument of efficiency and not a plan that provides a police or tyrannical-type regulation, the best internal control system is one that does not harm company-client relationships and maintains relations of high human dignity. employer to employee.

The function of internal control is applicable to all areas of business operation, its effectiveness depends on the administration obtaining the necessary information to select from the alternatives, those that best suit the interests of the company.

Internal control must establish a prior study of the needs and conditions of each company.

Internal control according to the Auditing Standards and Procedures in its technical glossary defines it as:

"It is represented by the set of policies and procedures established to provide reasonable assurance that the entity's specific objectives can be achieved."

Structure

The internal control structure consists of the following elements:

Control environment.

Accounting system.

Control Procedures.

goals

What is the objective of an internal control system?

It has several objectives such as:

Avoid or reduce fraud.

Safeguards against waste.

Safeguards against insufficiency.

Compliance with operating policies on safer bases.

Check the correctness and veracity of accounting reports.

Safeguard the assets of the company.

Promote efficiency in operation and strengthen adherence to the standards set by the administration.

Internal control in the audit of financial statements

The IMCP Audit Procedures Committee, when studying the Auditing standards, concludes that the Public Accountant must carry out an adequate study and evaluation of the internal control existing in the company that he examines, with the basic purpose of determining the trust that can be assigned to each phase and activity of the business, to specify the nature, scope and opportunity to be given to your Audit tests.

The study of the evaluation of internal control has as its primary objective the formulation of an Audit program, which when executed allows the Public Accountant to issue an opinion on the financial statements.

The purpose of reviewing accounting and internal control procedures is to find out what procedures are used and the efficiency of the existing internal control system, as a basis for determining the scope of the examination.

The review does not end with the investigations carried out at the beginning of the Audit but continues in the course of it.

Another objective is to take note of any modifications that may be recommended to reinforce, improve or simplify the existing system. These aspects must be communicated by means of memoranda of suggestions, containing the deficiencies located in the organization of the business.

Techniques to be applied in planning the Audit

• Study and Evaluation of the Organization. Study and evaluation of systems and procedures. Study and evaluation of flow charts. Study and evaluation of the internal control system. Factor Analysis.

Organization Study and Evaluation:

In order for the auditor to be fully aware of the organic structure and gather elements to study and evaluate the organization and the human team that comprises it, it must begin by obtaining a detailed organizational chart of the same, in the event that it does not exist, it will be one more reason for the auditor to prepare or update it and in the development of this task, you will find a magnificent opportunity to begin to know the organizational operation of the entity or the function subject to Auditing and, above all, the people involved.

In obtaining the organization chart, it is recommended that it be prepared covering the following points:

• Cover the entire entity or the function subject to revision. Contain the main positions of the entity and the entire structure in the case of revision to a function. Be perfectly established the types of authority if they are linear, functional and staff.

Study and evaluation of systems and procedures

It represents one of the most important actions in the planning and development of any Audit work.

Every entity must have operating systems and procedures manuals on which the auditor must base himself to make his study and evaluation of these concepts, but we find that very few are the entities that have them, in these cases, the auditor should develop them. for your purposes.

We can observe some problems:

• The extent to which they should be given and which is directly related to the time allotted to the auditor to perform his or her work, as well as the ability to describe operating procedures.

Let us take into consideration that a system is the conjunction of operating procedures that are framed in administrative policies and / or control provisions, the study and evaluation of said procedures must be carried out independently by each of those who make up that system to, Subsequently, once all those who make up the system have been identified, carry out the study and overall evaluation of it.

The study and evaluation of an operating procedure can be carried out in the following order:

First: Identify the generalities of the procedure:

• To which system or operational function does it belong, where does it start, where does it end, what objectives does it pursue, what administrative policies and / or control provisions must it respect.

Second: Describe sequentially the activities involved in the procedure subject to analysis and evaluation.

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