Going Concern Concept
There are many different concepts that companies must follow when it comes to accounting. One such concept is the Going Concern concept.
The going concern concept of accounting requires companies to prepare their financial statements based on the assumption that they will stay in the company for the foreseeable future. Staying in a company means carrying out commitments, repaying obligations, achieving objects, etc.
Usually, the foreseeable future is considered the next 12 months from the date of preparation of financial statements.
If a company cannot operate for the foreseeable future, then it must use the break-up basis to prepare its financial statements. This happens when the management of the company intends to liquidate the company or cease trading.
Usually, companies do not need to assess their going concern. However, in times of business downfall, they must assess their going concern.
For example, if due to some internal or external factors, a company cannot continue to make profits or generate enough cash inflows to meet outflows, it going concerned may be questionable. The responsibility to assess the going concern of a company lies with its management.
In order to assess the going concern of a company, its management will need to make judgements related to its future. When making these judgements, the management must take into account all available information about the future.
However, these judgments are based on various uncertain future outcomes of events to certain conditions. Usually, the management makes these judgments based on historical performance information.
However, sometimes, the management can also compare the current and expected performance of the company.
Factors that the management must consider to assess the going concern of a company
There are many factors that the management of a company must consider when assessing its concern. These factors are mostly external, which means the management has to use several tools such as PESTEL analysis to assess going concern.
However, these factors can also be internal. Some of the main factors that management can use to assess the going concern of a company are listed below.
The management of a company must assess the level of competition of the company. If the level of competition in the industry has significantly risen as compared to the past, it may mean that the company will have a harder time generating revenues and profits.
This, in turn, means that the company may go into losses and suffer cash flow problems, which will affect the going concern assumption of the management.
The management of the company must also the demand for the products of the company. If the demand of its products has declined, the company will have a difficult time generating profits.
Therefore, the demand of its products will also affect the going concern assumption of the company.
If a company has a history of being profitable but suddenly starts making losses on a regular basis, then its going concern assumption may be questionable.
This is mainly because of the profit-making ability of a company is one of the key indicators of its success and performance.
Similarly, if a company experiences a downturn in its profits, then its management will also have to reassess its going concern.
While most stakeholders only consider the profit of a company as an important indicator of its performance, the ability of a company to generate cash inflows is equally as important.
If a company cannot generate cash inflows to meet its cash outflow needs, it can face many problems.
Therefore, the management of a company must also assess its cash flows when deciding whether the going concern assumption is correct.
If a company cannot make profits or keep up with its cash outflows, it will have to resort to using alternative sources of finance to fund its projects. Rising debts can also be a red flag for the going concern assumption of a business.
Not only does increasing debts disturb the capital structure of a company but also comes with high-interest costs for the company. Therefore, it is an important factor when assessing the going concern of the business.
For a company to remain successful in the long-term, it must properly fund different business areas, especially areas that can affect the long-term success of the company.
These may include research and development, marketing, production, etc. If a company does not properly fund these areas, then it may face problems in the future, which is an indicator of problems with its going concern.
Going concern is an important accounting concept that requires the management of a company to assess whether the company can operate in the foreseeable future, which is generally taken as 1 year.
If a company cannot operate in the foreseeable future, then it must prepare its financial statements on a break-up basis rather than going concern basis.
To assess the going concern of a company, its management must consider several factors. Some of these factors include competition, demand of its products, profits, cash flows, debts and funding.
Consider your auditing firm just the same as a business partner. They are considered the same as someone who will be responsible for setting the ground for your company’s success. In addition, you will find yourself working with them time after time.
Set up a meeting prior
Meet face to face. Having a local firm will enable you to set up a meeting with them, if you have such an option, avail it. Like a prospective employee meet-up, this guarantees the Auditing group is both skilled and displays their grooming as well. If you ever get a hunch that having them will only result in stressful communication and drag down environment then, at that point avoid this firm.
Know how big is the firm
Before you connect any expert Auditing firm, you should require some serious energy and assess their believability as you likewise think about the size of the firm. Chipping away at unAudited reports is never a simple undertaking, and a business that needs enough labor will be unable to work superbly. Having a group of experts dealing with your budgetary records is far superior to having one individual endeavor the assignments.
At the point when you draw in a group of experts, each colleague will have the chance to display their mastery, and that assists with guaranteeing that your unaudited reports are processed exceptionally effective and in a precise manner and with an elevated level of skill. Working with a firm that has a sizeable number of experts largely increases the value of your business.
Make sure they are worth it
Normally, ensure the Auditing firm that you are pondering about looks acceptable on paper. Request verification of their preparation and capabilities that affirm them to play out the assessments your company requires. They must have a CPA.
Make sure you are hiring a good Auditor
However you pick, ensure that you have a decent feeling of the qualities and shortcomings of your Auditor. Auditing inspector can be employed freely or through an outsider. Picking the correct Auditor can help you effectively deal with your yearly or quarterly Audits with unwavering quality. Your auditor will turn into an aspect of your company, so look at what qualities you need in your Auditor and what shortcomings would you be able to deal in worse case.
Capacity to adjust
As referenced over, your Auditor will turn into an aspect of your organization; consequently, it is vital that your Auditor can adjust well as indicated by your hierarchical settings. You can skirt this thought on the off chance that you are happy to recruit free Auditors for your timetable organization Audits. Many Audit firms in Dubai offer exhaustive administrations to look at your assorted needs. Review firms like MBG have a specific staff that comprehends singular customer needs to assist you with accomplishing your organization Audit objectives as indicated by your necessities.
Market experience speaks gives you information about how many years an Audit firm has worked with customers. When searching for the experience of your Audit, ensure that you talk about their experience to comprehend the degree of their administrations and their dealings with the past customers. Likewise, ensure what you really are looking for in an Auditor and the kind of your needs, after that pick up a good Auditing firm or a freelance Auditor that can fulfil your needs.
During the Audit cycle, straightforwardness approach will hold a critical spot. Without this, you will never know about the Auditing measures and their result. In this way, it is significant that you pick an Audit firm that comprehends the correspondence straightforwardness and works with you during the organization Audit cycle to keep it consistent.
Make your organization’s money easy and simple to sort out with a solid Audit firm. The correct Auditor will not just keep a check on your money but in addition provide you with providing you the feedback you need to make a better decision with your organization’s money.
Know about Taxation processes
While drawing in an expert Auditing firm to take a shot at your unaudited reports, you ought to consider thinking about a firm with a group that is specialists in the tax assessment. Inappropriate announcement and documentation of tax assessment can become a huge problem for you and your company and can pull in a penalty if anything goes wrong. Thus it becomes clear whoever you hire, they must be a master of tax assessments.
Organizations are audited by the Health and Human Services Office of Civil Rights to check if they are following HIPPA. The OCR selects auditors at any time.
What does HIPPA stand for? It is an abbreviation for the Health Insurance Portability and Accountability Act. It is basically a federal law that was given out in 1996 to achieve incremental healthcare reform. The aim of this regulation is to transform the insurance and healthcare sectors by implementing various ways.
For example, HIPPA targets making the administrative process easier, cutting down expenses and paperwork, and enhancing the privacy of the patient’s information.
Requirements for HIPPA Audit:
Six steps need to be followed to become a HIPPA Compliance Auditor. They are explained below.
HIPPA training for employees
This is a crucial component in the HIPPA Compliance requirements. Employees can tend to have a failed audit if they have not been given training or if they do not have experience with the regulations of compliance. It is important that you must record or document your training in order to show the Office of Civil Rights (OCR) that you are capable and devoted to the instructions for employees.
The policies which give the highest priority to education and training should be formed and published as well. It is necessary to make sure that your team is completely trained in front of the OCR in the audit as tough questions regarding the HIPPA Compliance rules will be asked.
Form a risk management plan to conduct the risk analysis
These both elements are needed as well. It is the job of HIPPA risk analysis to search for any security risks within the company. Thus, these potential risks are brought to light by the courtesy of the risk management plan. Security documents should be created while going through the risk assessment. The reports revealed
by the compliance rules should be written, published on paper and store in an accessible area. The rules should be flexible enough to cover all domains of the business, not just a single aspect. For instance, the policies consisting of security rules and HIPPA privacy need to be brought on paper.
Similarly, documents that include the breach notification, physical security, incident response, and IT along with firewalls should be in the spotlight as well. The advantage of including these documents is that a clear direction is provided which can be followed in the operation and it aids in the audit procedure.
Choose a privacy officer and a security assessment
Each business and entity needs to have these two things as directed by the HIPPA. It is not necessary to hire someone new. A responsible person who knows how to manage PHI should be enough. Effort should be properly showcased in meeting the rules.
The business associate agreements have to be reviewed. The officer is also assigned with planning a review of the security policies and conducting a risk analysis on the data security and IT system. In case of any incident or breach, it should be informed as well.
Have an internal audit
This is an effective way to search for any errors prior to the OCR audit. If a habit or routine is formed of conducting an internal audit, all kinds of problems will be brought to light before they become worse. The team should be alert at all times and no pressure should be taken in the review.
In doing this step in the perfect way, it is advised to join hands with an organization that is efficient in data security and compliance. This organization will look into the details of the risk management plan and risk analysis which might go unnoticed by your eyes.
Moreover, a proper review of compliance standards and security is done by the organization which aids a lot. This way, the issues which you might not recognize in the internal risk assessment are highlighted.
In getting compliance with the HIPPA, risk analysis is the foremost and the most important are. The rules of the compliance are crucial to meet all regulations. To go a step further is essential for the HIPPA Compliance. In order to review the IT infrastructure, it is important to work with a HIPPA security Compliance expert.
Figuring the problems on your own and conducting a risk analysis prior to the audit has its own benefits. Before the OCR progresses for the next step of the HIPPA audits, it is necessary to be mentally prepared beforehand. The business and private medical information of the patients should be protected.
Auditing has turned out to be one of the most in-demand services across the globe. This is predominantly because of the increased reliance stakeholders now place on the assurance that is provided by these auditors, pertaining to financial statements within the company.
Given the numerous types of audits that are conducted over the normal course of business, it can be seen that all these types target different levels of a surety that customers are looking out for.
When it comes to taxes, it can be seen that tax auditors are high in demand, predominantly because of the fact that taxation tends to be an increasingly complex that is often intimidating for companies. The technicalities that are involved with taxation are perplexing and are often prone to error because of the possibility of miscalculating in this regard.
Therefore, tax auditors are hired by companies, organizations, and institutions in order to get validation regarding the tax returns that have been filed, in addition to the compliance of the law, and any other exemptions that should have been incorporated in this regard.
Credentials Required to Become Tax Auditors
Given the fact that the field of tax audit is a fairly technical field, it makes sense to have credentials and licenses to back up the field itself. In this regard, it is quite important to ensure that there is clarity regarding the career path individuals are supposed to take so that they are able to optimize their career trajectory and obtain the right credentials that are required to be a certified tax accountant in this regard.
Firstly, in order to be classified as a Tax Auditor, it is necessary to have a bachelor’s degree in accounting or a related field. This is to enable the tax auditors to get a basic understanding regarding the financial statements, as well as the state of affairs of the accounting policies (and overall compliance) within the organization.
Therefore, in this regard, it is rudimentary to ensure that the auditors are equipped with a general understanding of basic accounting principles, that can help them dissect the financial information at hand, based on which they can duly comment on the efficacy of the financial statements that are prepared for the company.
In addition to a basic Bachelor’s degree, there also needs to be a qualification that is specific to the tax subject. This means that there is a need to obtain a professional qualification in addition to the basic degree. In most cases, this professional qualification tends to be a CPA.
This licensure exam is conducted by the Accountancy Board, and it prepares individuals regarding numerous components that prove to be useful for careers relating to accounting and audit.
As far as Tax Auditors are concerned, this professional qualification adds tantamount credibility and volume to the existing state of affairs, primarily because of the fact that it helps users to have an in-depth idea and understanding relating to tax-related affairs, which are highly complex and technical in nature.
Another credential that is required of tax auditors is that of professional experience. As a matter of fact, it is highly important for tax auditors to have a considerable chunk of experience under their belt so that they are able to extrapolate in circumstances that are not explicitly covered in the professional qualification.
Since a very considerable chunk of tax audit is assurance, it is imperative that the tax auditor has experience which can be used in order to gauge tax-related issues in terms of proper materiality.
As a matter of fact, it can be seen that these are some of the most important parameters that are required for tax auditors to apply the required due diligence in the existing state of affairs.
Therefore, there is no doubt to the fact that tax auditors have a high level of responsibility on their shoulders pertaining to the areas that they need to cover in order to provide a reasonable level of assurance to their clients. It requires technical knowledge that needs to be applied to real-life scenarios in order to ensure that they can give reasonable evidence based on findings of the tax audit.
Hence, in this regard, it is important to ensure that tax auditors are able to understand the given process and the dynamic that is required to comply properly and fully with the stated tax law. The profile and credentials tend to increase over the course of time, and experience tends to be the key factor in this regard.
Taxation tends to be one of the most complex and challenging parts of the accounting division within the company. This is primarily because of the reason that its in-depth analysis, and understanding of the transactions that take place over the fiscal year of the company, and the associated taxes with these transactions.
This cannot be done by simply looking at the tax laws of the specific country, because there are numerous clauses involved that should be considered before presenting a clear cut idea regarding the taxes of the given organization.
Despite the fact that companies tend to hire tax lawyers for this purpose, it can be seen that tax auditors also have a significant role to play in this regard. From an organizational perspective, it can be seen that tax auditors are supposed to double-check and verify if the company has paid the correct amount of taxes, and if there is anything questionable within the financial statements because of which the taxable amount is incorrect.
In addition to organizations, tax auditors also cater to other areas, including governments, institutions, and not-for-profit entities. Since tax auditors act as an intermediary between the government (revenue collection service) and the taxpayer, their responsibility is quite considerable and should be taken very seriously.
How to Become a Tax Auditor?
Tax auditors are now high in demand because of the increasing need for corporations to ensure that they are in compliance with the stated tax law. Therefore, it requires tax auditors to have sufficient knowledge regarding the basic accounting laws and treatments, in addition to tax principles that are used in the respective tax regime.
Hence, it can be seen that the primary requirement to obtain certification as a tax auditor requires a basic degree in relevant education. This includes accounting and finance-related degrees, which are necessary in order for auditors to get a basic understanding regarding the financials (and financial statements) of the companies.
It is imperative that a basic level of understanding is going to enable familiarity relating to financial statements so that these auditors can comment on the financial statements with the required knowledge and familiarity.
Followed by basic graduation in a related field, there are certifications and additional degrees in place that prepare individuals to be regarded as properly certified auditors. These certifications include CPA, and Specific Tax Auditor Certifications, which are licensed, and considered as a credible source of validating that the individual has the required skill set that is required to comment on the viability of the tax audit.
Apart from these certifications, practical hands-on experience is also a very crucial factor in determining the performance, and service protocols of the given tax auditor.
For example, experience as a tax lawyer or tax accountant in an organization can further validate that the individual has the required experience to comment on the tax viability within the organization. This is something that is highly useful for auditing tax-related assignments of various different companies because it strengthens credibility checks for the given individuals.
Therefore, it can be seen that in order to become a tax lawyer, individuals need to pass a learning curve that constitutes basic degrees, certification, as well as practical hands-on experience. Depending on the efforts that go into basic tax audit regimes, it can be seen that validity and integrity begin contributing to a blossomed career as a tax accountant.
In this regard, the importance of being associated with a reputed tax consultancy, or any of the Big 4 Firms is also an added incentive, because it gives individuals an opportunity to nourish their careers for the better outcome.
Therefore, there is no doubt to the fact that becoming a tax auditor does require seriousness on part of individuals who aspire to be recognized in the given domain. However, individuals must also realize that it is necessary to understand the level of responsibility that is associated with the tax measure so that better outcomes can be evaluated in the longer run.
As a matter of fact, it is similar to validating that there are no inconsistencies, irregularities, or issues with the tax returns that have been filed by the company, and this audit tends to reflect all their findings. Hence, it is important for tax auditors to design their testing procedures in a proper manner, which can help them provide reasonable assurance regarding their findings.
The manner in which IT has transformed over the years has had an impeccable impact on the overall compliance-related issues within the company. As a matter of fact, it can be seen that IT Compliance related issues can be regarded as phenomenal, and highly important because of the reason that it helps organizations to establish a certain protocol pertaining to compliance-related issues that are set by governments, and other related agencies.
Hence, it can be seen that IT Compliance Auditors are high in demand because they cover substantial ground when it comes to compliance and other relevant features that can act as a safeguard for the company against possible financial losses.
As a matter of fact, it can be seen that IT Compliance Auditors are supposed to ensure that all IT related issues within the organization are in compliance with the law, as well as other relevant issues that can help organizations abide by the set laws and conditions within the company.
Therefore, it requires compliance auditors to understand the mechanics and dynamics of the infrastructure involved, in order to be able to gather substantial evidence that can help them comment on the IT infrastructure within the organization.
IT Compliance Auditor
IT Compliance Auditors are probably one of the most important auditors within the realm of auditory and compliance-related issues.
Therefore, it is increasingly important to ensure that they have clarity regarding the tasks and objectives they need to cover so that they are able to produce better and more reliable observations based on which useful recommendations can be drawn. It is highly advisable that IT Compliance Auditor is able to cater to the following tasks and objectives.
- The need of Assurance: It is imperative that Compliance Auditors are able to provide reasonable assurance regarding the existing IT infrastructure, and the fact that it does not expose the company to a substantial risk pertaining to data handling, and inherent security threats.
- Compliance: Industry-specific compliance is also an important parameter in this regard, essentially because of the reason that it helps organizations to ensure that they are following the rule of laws and legislations in place.
- Competitive Advantage: Given the tantamount reliance on IT in the modern-day and age, it can be seen that IT Compliance Auditor is also supposed to give recommendations regarding the IT advantages that can be obtained from the existing state of affairs. In this regard, it also becomes helpful for the compliance auditor to ensure that he identifies areas of improvement, and then advises the company regarding the implementation and execution of the required tasks and objectives.
- Cybersecurity: Cybersecurity and data handling also tends to be one of the main course of actions that can be utilized by the company. This is primarily because of the fact that it can help organizations ensure that all their data security breaches are accounted for so that the firm is not exposed to external threats that might result in financial losses over the course of time.
- Audit and Recommendations: Lastly, the main function of the IT Compliance Auditor is to ensure that he is able to audit and subsequently comment on the credibility of the IT functions within the organization. In this case, it is rudimentary to ensure that all the related IT services are included in the testing features, and all issues are identified with proper ease. There is no doubt to the fact that this is the primary function of the IT Compliance Auditor because based on this judgment, the way forward is prescribed for the auditors.
Therefore, there is no doubt about the fact that IT Compliance holds vital importance in terms of getting a deeper insight regarding the IT affairs within the organization.
In this regard, it gets highly important for compliance auditors to design the required testing procedures that can help them get a transparent idea regarding the approach that is adopted by the company in terms of achieving IT integration into their state of affairs, and how it can positively contribute towards a larger scheme of affairs for the company.
However, it must be considered that it requires compliance auditors to ensure that they develop a clear understanding of the policies that are required in terms of compliance, and other relevant laws and legislations.
Therefore, a combination needs to be drawn between the compliance-related requirements of the law, as well as the IT culture existing within the company. Based on this, conclusions can be respectively drawn.