What is an audit?

An audit is an analysis and evaluation of the audited subject, usually financial statements, in order to express an opinion on the company's financial condition, performance and cash flows. Thus, an audit generally refers to an audit of financial statements.

What does the audit check?

The object of the audit depends on the type of audit. Auditing is traditionally the examination of financial statements, but can also be used to describe other types of examinations. According to the inspection object, the audit can be:

Financial audit – financial statements of companies are checked (balance sheet, profit (loss) statement, cash flow statement, statement of changes in equity and explanatory letter).
Performance audit - it is checked whether the company's resources are used efficiently, economically and productively.
State audit - its purpose is to supervise whether state finances and other assets are legally and efficiently managed and used, and how the state budget is executed.
Management audit - aims to assess whether the company is managed properly and reveal opportunities for improvement.
Information systems audit - system risks are assessed and recommendations are made to manage existing and potential risks.
Audit of regulated activities – reports of regulated activities are checked. It is carried out in energy, drinking water supply and sewage treatment companies in order to assess whether the regulatory accounting system meets the requirements, and the data presented in the reports correspond to the accounting records.
Security audit etc.

Who needs an audit?

The purpose of an audit is to increase the confidence of the intended users in the financial statements. This is achieved by the auditor expressing an opinion on whether the financial statements, in all material respects, comply with the procedure for the preparation of financial statements. During the audit, the auditor forms an opinion about the financial statements, which he declares by submitting an independent auditor's conclusion.

Mandatory audit

The obligation to conduct an audit is determined by the Law on Financial Reporting of Companies. Whether a company is required to conduct an audit depends on its legal form, size, activities and other characteristics.

As a rule, the audit of financial statements must be carried out in closed joint-stock companies (UAB), where at least two indicators are exceeded on the last day of the financial year (i.e. the balance sheet day):

The value of balance sheet assets is more than 1.8 million. EUR.
Sales revenue per year is greater than 3.5 million. EUR. Income is calculated after subtracting the discounts granted.
During the financial year, the company had an average of more than 50 employees. The number of employees is calculated according to the rules for calculating the average annual number of employees according to the list approved by the Minister of Finance of the Republic of Lithuania.

The same indicator requirements apply to cooperative companies, business partnerships (whose true members are all companies).

Regardless of the size of the company, the audit must also be performed by:

state and municipal companies and closed joint-stock companies in which the state or municipality is a shareholder;
public interest companies;
joint stock companies;
closed joint-stock companies whose prices of goods (services) are regulated by law.

In not rare cases, companies or their shareholders decide to conduct an audit even if it is not mandatory. For example, shareholders who are not actively involved in the management of the company want assurance that the reports provided by the managers present a true and fair view of the company's financial condition, performance and cash flows. An audit is also often performed when acquiring a company (financial due diligence) or when selling company shares, so that the shareholders may gain a better understanding of the value of the shares.

Audito įstatymas

Auditing is regulated by the Audit Law and professional standards, other regulations and practical instructions. International auditing standards adopted by the International Federation of Accountants (IFAC) are applied in Lithuania. Auditors' activities are also regulated by the Code of Ethics and the International Quality Control Standard (IQC).

Audit companies

Only audit firms can perform the audit of financial statements. Audit company - a company that has been issued an audit company certificate and the company is included in the list of audit companies. Only audit companies can provide assurance (audit) and related services.

The activities of audit firms are not only strictly regulated, but also supervised. Quality assurance of the audit of financial statements performed by public interest company auditors and audit companies is performed by the Audit, Accounting, Asset Valuation and Insolvency Management Service under the Ministry of Finance of the Republic of Lithuania. The employees of the service perform the evaluation of the audit of financial statements performed by auditors and audit companies in order to ensure the quality of audits. They check whether the audit company's internal control system is effective, evaluate its structure, whether policies, procedures, audit law are followed, and revise the audit methodology. The Lithuanian Chamber of Auditors performs quality assurance of audit companies that do not audit public interest companies.

UAB "Tezaurus auditas" provides audit services.