According to the BC Business Corporations Act, each incorporated company is legally required to have an audit. The law does allow companies that have shares which are not traded on the public market to waive the requirement for an audit provided that certain conditions are met.
Audited financial statements are the accepted means by which most business corporations report to their shareholders, to bankers, to creditors and to the government. Federal and Provincial legislation in Canada generally requires a limited company to prepare annual financial statements for audit by a qualified independent auditor. Specific legislation may also require the auditor to provide other information in the report.
It is important to note that some companies may be exempted from the audit requirement if all shareholders agree, in writing, to waive the appointment of an auditor.
The objective of an audit engagement is to enable an independent public accountant to form an opinion on whether your company’s financial statements present fairly the financial position, results of operations and cash flow. This opinion is given in the form of a written report which normally consists of three paragraphs. The first, or introductory paragraph, identifies the audited statements and sets out the responsibility of management and the auditor; the second, or scope paragraph, concisely states the scope or extent of the audit and informs the reader that professional standards were used in the audit and that evidence is acquired through inspection, observation, enquiry, confirmation, computation and analysis. The last paragraph summarizes the auditor’s opinion based on his or her examination.
The audit consists of an examination of the accounting records and other evidence supporting those financial statements. Through the study and evaluation of the company’s system of internal control, and by inspection of documents, observation of assets, making of enquiries within and outside the company, and by other generally accepted auditing standards, the auditor will gather the evidence necessary to determine whether the financial statements present a fair picture of the company’s financial position and its activities during the period being audited.