What is External Audit?
External audit is an independent examination of a company’s financial statements conducted by an external, licensed audit firm with the objective of expressing an opinion on whether the statements are fairly presented in all material respects.
How It Works
- Planning: risk assessment and audit strategy.
- Fieldwork: testing of controls and substantive testing of balances and transactions.
- Reporting: issuance of the audit opinion.
- Communication: management letter on internal control weaknesses.
Saudi Context
All Saudi joint-stock companies, listed entities, and entities meeting specified size thresholds must have annual financial statements audited by SOCPA-licensed firms. The Saudi Companies Law requires shareholder approval of the auditor appointment and a rotation policy for the audit partner (typically 5 to 7 years) to safeguard independence.
Example
A Saudi LLC engages a SOCPA-licensed audit firm to audit its 2026 financials. The audit covers SAR 50,000,000 in revenue, 2,200 transactions, and ends with an unqualified audit opinion signed in April 2027 ahead of the ZATCA filing deadline.