Financial audit of the public sector

Financial audit of the public sector is one of the most important subjects while studying to earn an accounting degree. In the current conditions of marketable economy a proper accounting education is an invaluable asset to have a complete perception of the financial situation of the company. For this purpose is used financial audit of the public sector, which with its accuracy and comprehensiveness makes it easier to maintain the financial balance of the public companies.

Public companies have specific position in the realization of their functions, as well as specific problems they are struggling with. Their position is regulated like the positions of any other company, but it acts as corporations owned by state and local governmental bodies.  The auditing of financial accounting statements of public companies is very important in the realization of the objectives of public enterprises.  They have special responsibility to inform the public about the activities and operations of their companies. All public companies are required at the end of the business i.e. financial year to present the annual financial statements.

When compiling the annual financial statements, biggest influence has the accounting measures i.e. evaluation as well as requirements for disclosure in the prescribed form. The main objective of the above requirements is to create conditions for fair and honest financial reporting of numerous external users, including the investors.

Accountants along with the professional management of organizations contribute to financial auditing of the public sector. Generally, the tasks of public sector’s financial audit are limited to the analysis of financial information, determining the volume, structure of capital and financial structure. An audit of financial information is the analytic interpretation of available information on which basis can be made assessment of the current financial situation of public. By applying the rules contained in the International Accounting Standards is provided uniformity and comparability in the presentation of data in the financial audit of the public sector. The objective of financial auditing of the public sector is to provide information on the operations of public enterprises, financial position, etc., which are necessary for the administration and management as well as for external users in making economic decisions. Economic decisions made by users of financial statements are based on the auditor’s assessment of the ability of the company to timely and continuously carry out their obligations to suppliers, creditors, employees and the state.

To achieve the goals of public companies’ financial audit, they need to show their qualitative characteristics, as well as to respect the key principles in preparing the financial statements. Data obtained by the financial auditing of the public sector are a base for the registry of information on the creditworthiness of legal entities and are essential elements of the macroeconomic information in the country and making strategic decisions.