audit
An audit is an independent examination of a company's accounts, and it exists because nobody should be trusted to mark their own work.
In plain English
A company prepares its own accounts. It decides what to record, how to value things, and what to emphasise. Then it asks everybody to believe the result.
An audit is an independent professional examining those accounts and giving an opinion on whether they present a true and fair view. It exists because nobody should be trusted to mark their own work, and because history is full of companies whose figures were beautiful right up until they were not.
For a Nigerian business owner, audits matter in three places. Larger companies are legally required to have them. Banks and investors want them before lending or investing. And for you, an audit is frequently the first time somebody independent tells you the truth about your own business.
For an investor, the auditor's opinion is worth reading and almost nobody does. A clean opinion is unremarkable. A qualified opinion, or a note about the company's ability to continue as a going concern, is the auditor quietly telling you something serious, and it is usually there for months before the collapse everybody claims was a surprise.
Read the auditor's report before the chairman's statement. One of them is required to be honest.
An investor reads a company's glowing annual report and buys the shares. The auditor's report, three pages further on, contains a note about the company's ability to continue as a going concern. It was there the whole time, in plain language.
Questions people ask
Does my small business need an audit?
It depends on size and legal requirements, and banks or investors may demand one regardless. Even where not required, it is frequently the first honest look at your own numbers.
What is a qualified opinion?
The auditor is unable to say the accounts are entirely true and fair, and explains why. It is a serious signal and it is routinely ignored.
What is a going concern note?
A statement raising doubt about whether the business can continue operating. It is one of the loudest warnings in finance, written in the quietest language.
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