Share
An audit is a process of expressing an opinion and issuing a report on whether a specific event, delimited by a certain period of time, complies with established criteria. Both the criteria and the audit procedures must be clearly defined.
For example:
A financial statement audit involves evaluating whether the financial statements of a client/preparer, prepared as of a specific financial year-end, have been prepared fairly and accurately in accordance with the International Financial Reporting Standards (IFRS).
To reach this conclusion, the audit is conducted using procedures and methodologies in accordance with the International Standards on Auditing (ISA). The outcome is a written audit report, which includes the auditor’s opinion and relevant disclosures or explanations.
Financial Audit GuideWhat is an Audit of Financial Statements?
An audit is a process through which an opinion and report are provided on whether events within a specific period of time comply with established criteria. Both the criteria and the audit procedures must be clearly defined.
For example: A financial statement audit is conducted using internationally accepted audit methodologies (as per International Standards on Auditing) to determine whether a client’s financial statements, prepared for a specific fiscal year, are accurate and comply with International Financial Reporting Standards (IFRS). The outcome is a written opinion with detailed notes and clarifications.: What is an Audit of Financial Statements? Who Conducts an Audit?
Audits are carried out by individuals with international or Mongolian certifications as professional accountants or licensed auditors. The audit opinion is issued in the name of an authorized legal entity with a special license from the Ministry of Finance.
Audit work is conducted by a team that typically includes:
An engagement partner or director (often the managing director in Mongolia), who signs off on the opinion.
A lead auditor who performs the audit work.
Team members such as assistants and specialists, which may include valuers, engineers, actuaries, economists, IT professionals, etc.: What is an Audit of Financial Statements? How is an Audit Conducted?
The audit examines financial and operational information delimited by a specific time period, according to defined criteria.
For example: During a financial audit, the auditor verifies whether the organization’s financial statements comply with IFRS or other applicable rules.
As per the Law on Auditing of Mongolia, audits must follow the International Standards on Auditing. According to these standards and the law, the audit process consists of the following stages:
1. Acceptance
2. Planning
3. Execution
4. Quality Control
:Reporting and Completion
Audit timelines are mutually agreed upon by the auditor and the client, depending on legal deadlines and the client’s schedule.
: What is an Audit of Financial Statements? Can an Audit Be Declined?
Auditing firms must decline an engagement if:
– They have audited the same client for more than 5 consecutive years.
– They have provided bookkeeping or tax advisory services to the client during the same period.
– Conflicts of interest or lack of independence arise (e.g., significant receivables or payables, shareholding interests, close relationships with key management, etc.).
When selecting an audit firm, the client must ensure:
– The firm holds a valid, active license issued by the Ministry of Finance.
– The firm meets any sector-specific requirements (e.g., registration with the Financial Regulatory Commission for insurance or securities firms).
– The firm maintains compliance throughout the audit process.: What is an Audit of Financial Statements? When is an Audit Mandatory?
An audit is mandatory if the client is:
– A publicly listed company (PLC).
– An entity with assets exceeding MNT 500 million or annual income over MNT 1.5 billion.
– A bank, non-bank financial institution (NBFI), insurance company, or investment fund.
– Audits may also be required by investors, lenders, or for tender participation.: What is an Audit of Financial Statements? Engagement and Communication During Audit
Once an audit firm is selected, a formal contract is required. Usually, the firm will send an “engagement letter” outlining the scope, rights, and responsibilities as per the International Standards on Auditing.
Additionally, auditors must submit an “audit planning letter” to those charged with governance (e.g., audit committee, board of directors, shareholders), which includes:
– Understanding of the client entity
– Identified risks
– Information required from the client
– Materiality thresholds
– Expected audit challenges
Disagreements may occur during the audit; both parties must provide written explanations and evidence to support their positions.: What is an Audit of Financial Statements? Auditors may also request to meet previous auditors, valuers, or tax advisors, with client consent. They may send confirmation letters to third parties such as borrowers, lenders, related parties, and legal representatives.
Auditors assess the entity’s ability to continue as a going concern, asking questions about legal disputes, financial forecasts, and post-year-end events.
At the conclusion of the audit, all findings must be acknowledged and signed by both parties, including whether corrections will be made or not. A detailed letter is issued to those charged with governance.: What is an Audit of Financial Statements?
Mongolian 
English