You might have a clean audit opinion but material weakness in your internal control function… It’s better to check it out.
The opinion of a company’s auditors that its financial statements are fairly presented in accordance with generally accepted accounting principles.
Internal control is a process put in place by a company’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives.
When an auditor issues a clean opinion on the company’s financial statements, this is a representation to the public that the auditor has followed applicable auditing and associated professional standards to allow the auditor to conclude with reasonable assurance that the financial statements are fairly presented in line with Financial Reporting Standards in all material respects.
However, a clean audit opinion is not a guarantee of error-free financial statements, it is a conclusion by an auditor, using procedures and professional judgment that are reasonable, that the financial statements are fairly presented.
The auditor or the company are not required to disclose whether the audit process revealed financial statement errors that were corrected before the financial statements were filed with the CRO. An indication of whether the company has produced financial information that are materially accurate is the level of adjustments the auditors required management to correct in the financial statements prior to their public filing.
Therefore, while the audit of a company’s financial statements may be clean, this does not indicate that the current internal control function is operating effectively or that other financial information provided throughout the year is materially accurate.
Internal controls in financial reporting and safeguarding assets are imperative because effective controls reduce the risk of asset loss and help ensure that budgeted and monthly information is complete and accurate, monthly and annual financial statements are reliable, and that the company complies with laws and regulations.