Preparing for a financial statement audit in Jordan requires more than providing a trial balance at year-end. Management and finance teams need accurate accounting records, reconciled balances, organized supporting documentation, and a clear understanding of the audit timetable and reporting requirements.
In practical terms: a financial statement audit is an independent examination of an entity’s financial statements performed to enable the auditor to express an opinion in accordance with the applicable auditing and financial reporting framework. The scope, timing, documentation requirements and reporting obligations depend on the entity and the circumstances of the engagement.
For companies operating in Jordan, a well-prepared audit process can reduce avoidable delays, improve the quality of information provided to the auditor, and allow significant accounting and reporting matters to be addressed before the reporting deadline.
International Standards on Auditing are part of the professional framework applicable to statutory audit work in Jordan. The financial reporting framework and regulatory requirements applicable to a particular entity may vary according to its legal form, regulatory status, sector and reporting obligations.
Organizations looking specifically for professional audit support can also review our External Audit & Assurance Services in Jordan .
What Is a Financial Statement Audit?
A financial statement audit is an independent assurance engagement over financial statements prepared by management.
The auditor plans and performs procedures to obtain sufficient appropriate audit evidence and reaches a conclusion based on that evidence. The purpose is to express an independent opinion on whether the financial statements have been prepared, in all material respects, in accordance with the applicable financial reporting framework.
Management remains responsible for preparing the financial statements, maintaining appropriate accounting records, selecting and applying appropriate accounting policies, and establishing the internal controls necessary for reliable financial reporting.
The auditor’s responsibilities are separate from management’s responsibilities. Maintaining this distinction is fundamental to the independence and credibility of the external audit process.
When May a Financial Statement Audit Be Required in Jordan?
The requirement for audited financial statements should be assessed based on the circumstances of the specific entity. It should not be assumed that every organization in Jordan is subject to exactly the same requirement.
An audit requirement may arise from factors such as:
- The legal form and registration of the entity.
- Applicable Jordanian corporate legislation.
- Securities or sector-specific regulatory requirements.
- Shareholder or governance requirements.
- Banking or financing agreements.
- Investor requirements.
- Group reporting instructions.
- Donor, grant or project agreements.
- Contractual obligations with another party.
Because the applicable requirement may differ from one entity to another, organizations should confirm their specific statutory, regulatory and contractual obligations before defining the scope of the engagement.
The Financial Statement Audit Process
Although each audit is designed according to the entity and its risks, a financial statement audit generally progresses through several key stages.
1. Engagement Acceptance and Independence
Before accepting or continuing an audit engagement, the audit firm considers matters relevant to professional acceptance, including independence, conflicts of interest, professional eligibility, engagement risk and resource availability.
The parties should also establish a clear understanding of the reporting period, expected financial reporting framework, required deliverables and reporting timetable.
2. Understanding the Business and Audit Planning
Audit planning begins with understanding the entity, its activities, operating environment, accounting processes, financial reporting arrangements and relevant controls.
Areas considered during planning may include:
- Significant classes of transactions and account balances.
- Revenue streams and business cycles.
- Accounting estimates and areas involving judgment.
- Changes in operations during the reporting period.
- Related-party relationships and transactions.
- Information systems relevant to financial reporting.
- Regulatory and contractual matters.
- Areas where material misstatement may arise.
A professional audit is therefore not simply a year-end inspection of invoices. Audit procedures are designed in response to the risks identified during planning.
3. Audit Evidence and Testing
The nature and extent of audit procedures depend on the assessed risks, materiality and circumstances of the engagement.
Procedures may include, where relevant:
- Inspection of accounting records and supporting documents.
- External confirmations.
- Analytical procedures.
- Testing of transactions and balances.
- Observation of selected processes or procedures.
- Evaluation of accounting estimates.
- Review of contracts and agreements.
- Testing of financial statement presentation and disclosures.
A generic checklist cannot determine the precise procedures required in every audit. The audit approach must reflect the entity’s circumstances and the auditor’s professional risk assessment.
4. Audit Completion
As fieldwork approaches completion, significant matters and outstanding audit requests are resolved and the final financial statements are reviewed.
The completion stage may involve:
- Evaluation of identified misstatements.
- Completion of outstanding audit procedures.
- Consideration of subsequent events.
- Assessment of going-concern matters where relevant.
- Review of financial statement presentation and disclosures.
- Completion of management representations.
- Final professional review and reporting procedures.
5. Independent Auditor’s Report
At the conclusion of the engagement, the auditor issues the applicable independent auditor’s report based on the audit evidence obtained and the conclusions reached.
The precise form of the report depends on the circumstances of the engagement and the applicable professional requirements.
Documents Commonly Requested During a Financial Statement Audit
The precise information request should be tailored to the business. However, finance teams can usually prepare several important categories of information before audit fieldwork begins.
Accounting Records
- Final or near-final trial balance.
- General ledger.
- Chart of accounts.
- Draft financial statements.
- Prior-year audited financial statements.
- Detailed account reconciliations.
Cash and Banking
- Bank reconciliations.
- Bank statements.
- Loan and financing agreements.
- Schedules of bank facilities.
- Information required for confirmation procedures.
Revenue and Receivables
- Customer ageing reports.
- Sales and revenue reports.
- Significant customer contracts.
- Credit notes and adjustments.
- Subsequent collection information.
- Supporting documentation for significant balances.
Purchases, Expenses and Payables
- Supplier ageing reports.
- Major supplier agreements.
- Accrual calculations.
- Unpaid invoice listings.
- Subsequent payment information.
Inventory
Where inventory is material to the financial statements, information may include:
- Detailed inventory listings.
- Inventory costing information.
- Inventory locations.
- Physical count records and procedures.
- Slow-moving and obsolete inventory analysis.
- Reconciliation between inventory records and the general ledger.
Property, Equipment and Other Assets
- Fixed-asset register.
- Schedules of additions and disposals.
- Ownership documentation.
- Depreciation calculations.
- Supporting information for significant valuation or impairment matters.
Corporate and Legal Information
- Company registration and governance information.
- Board and shareholder minutes where relevant.
- Material agreements and contracts.
- Information regarding litigation or claims.
- Related-party information.
- Material changes in ownership or governance.
Important: this list is illustrative rather than exhaustive. The audit firm should issue an engagement-specific information request after understanding the entity, its activities and the scope of the audit.
How Long Does a Financial Statement Audit Take?
There is no responsible universal answer such as “five days” or “two weeks” for every external audit.
The timetable can be affected by:
- Company size and transaction volume.
- Number of locations or entities.
- Complexity of operations.
- Quality and completeness of the accounting records.
- Material accounting estimates or unusual transactions.
- Availability of supporting documentation.
- Response time to audit requests.
- Third-party confirmation procedures.
- Group or regulatory reporting requirements.
- The required reporting deadline.
The better approach is to agree an audit timetable with clearly defined milestones rather than rely on a generic number of days.
Common Causes of Audit Delays
Unreconciled Accounts
Bank, receivable, payable, inventory or intercompany balances that have not been reconciled before fieldwork can generate repeated queries and delay completion.
Multiple Versions of the Trial Balance
Beginning fieldwork before the accounting close is sufficiently advanced can result in frequent changes to the trial balance and financial statements, requiring audit work to be updated.
Missing Supporting Documentation
Significant balances without organized supporting evidence may require additional follow-up and alternative procedures.
Late External Confirmations
Certain confirmation procedures depend on responses from third parties. Starting these procedures late can affect the reporting timetable.
Unresolved Prior-Year Matters
Recurring accounting or documentation issues identified in an earlier audit should be reviewed before the next year-end process where possible.
Year-End Audit Readiness Checklist
Before the agreed audit start date, management and the finance team should consider whether the following steps have been completed:
The accounting period has been properly closed.
Material balance-sheet accounts have been reconciled.
The trial balance agrees with the draft financial statements.
Significant accounting estimates have supporting analysis.
Related-party balances and transactions have been identified.
Material contracts and governance decisions are available.
Inventory records are reconciled where applicable.
Bank reconciliations have been completed.
Relevant prior-year audit matters have been reviewed.
Responsibilities for responding to audit requests have been assigned within the finance team.
A structured year-end close does not reduce the auditor’s independent procedures. Its purpose is to ensure that accounting information and supporting evidence are ready when required.
Financial Statement Audit vs. Review Engagement
An audit and a review engagement are not interchangeable.
A financial statement audit is designed to provide reasonable assurance and involves risk assessment and audit procedures sufficient to support an audit opinion.
A review engagement provides limited assurance and generally involves substantially less extensive procedures, principally inquiries and analytical procedures.
The appropriate engagement should therefore be determined by the applicable legal, regulatory, shareholder, lender, group or contractual requirements rather than simply by comparing fees.
Choosing an External Auditor in Jordan
Selecting an auditor should involve more than comparing audit fees.
Relevant considerations can include:
- Professional licensing and eligibility.
- Independence and conflict considerations.
- Experience relevant to the entity and its sector.
- Understanding of the applicable financial reporting framework.
- Audit methodology and quality management.
- Communication and engagement management.
- Ability to meet the required timetable.
- Ability to address group or cross-border requirements where relevant.
For further guidance, read How to Choose the Right Licensed Auditor in Jordan .
Frequently Asked Questions
Which auditing standards apply to statutory audits in Jordan?
International Standards on Auditing form part of the professional framework applicable to mandatory audit work in Jordan. The requirements applicable to an individual engagement should be evaluated based on the entity and the relevant legal and regulatory framework.
Are all companies in Jordan subject to the same audit requirement?
No. Audit and reporting requirements may differ according to the entity’s legal form, regulatory status, sector, contractual obligations and other circumstances.
What documents should a company send to the auditor first?
A practical starting package usually includes the trial balance, general ledger, draft financial statements, prior-year audited financial statements and key account reconciliations. The auditor should then provide a tailored information request.
Does the external auditor prepare the company’s financial statements?
Management remains responsible for the financial statements. Any additional assistance involving financial statement preparation must be considered separately and in accordance with applicable professional and independence requirements.
Can audit work begin before the year-end accounts are fully finalized?
Audit planning and certain procedures may begin before year-end. Final reporting, however, requires sufficiently complete financial statements and appropriate audit evidence.
What commonly causes an external audit to take longer?
Common causes include incomplete reconciliations, missing supporting evidence, complex transactions, significant estimates, multiple locations, delayed confirmations and late changes to the financial statements.
Discuss Your External Audit Requirement in Jordan
If your organization requires an independent financial statement audit in Jordan, Al-Hiary Auditing Office can discuss the reporting period, applicable framework, expected scope and required completion date before an engagement is proposed.
Engagement acceptance remains subject to independence, conflict-of-interest, professional eligibility, resource availability and applicable client-acceptance procedures.
Professional References
- International Federation of Accountants (IFAC) – Jordan jurisdiction and professional framework.
- International Auditing and Assurance Standards Board (IAASB) – International Standards on Auditing.
- Jordan Securities Commission – financial reporting and disclosure requirements applicable to regulated entities.
