Conducting an annual business audit is important for everyone. In brief, an audit is an evaluation of the financial statements of a business. And as your company grows, it is important to track your finances.
Our professional team at Saddock Advisory can help you with auditing your company. Business audits help you work efficiently, all while preventing theft or discrepancies within an organization. Audits are there to assist with the accuracy of accounting records within an organization.
Preparing For A Business Audit: What To Know
A business audit will check whether the standards, facts, and assumptions about your business align and your auditor will determine whether the financial statements are in order.
An audit is a written report, also known as an audit opinion. The audit opinion defines the audit and your auditor will base their report on several points:
1. Your Auditor Determines Misreports
It is the job of the auditor to determine if there are any material misreports in the financials. If there has been a mistake, a lack of due diligence, or any blatant mismanagement of your records, your auditor is there to suss it out.
In essence, audit findings will pinpoint any missing information or errors that impact the financial statements.
2. Your Auditor Follows Standard Regulations
Your auditor will use their accounting skills to prepare financial statements for a business.
For-profit businesses within the USA follow the “Generally Accepted Accounting Principles” (referred to as GAAP). Non-profits and governmental companies apply different accounting rules and regulations. Audit options stipulate auditors prepare financial statements according to certain guidelines.
3. The Need for Internal Controls
Auditors put certain financial controls in place. These are for the accurate assessment of the financial statements of a business.
These are to protect business assets from theft (internally and externally), as well as highlight any questionable points within organizational controls. They will disclose any weaknesses, inconsistencies, and discrepancies.
Moreover, having accurate financials is not only highly desirable but necessary. Creditors, investors, and regulators need correct financial statements in order to do their own jobs.
4. Internal vs. External Auditing
There is a distinction between external and internal audits. Each one plays a unique role when it comes to managing your business.
External Audit
Certified public accountancy firms are the ones who perform external audits. These firms are separate from the business under audit, entering as an unbiased party.
The only connection to the firm under audit is the compensation that the CPA receives. The CPA firm cannot consult or perform any other duties for the audited client. We consider the findings from an external auditor more reliable than work performed by an internal auditor because there aren’t any conflicting interests.
Internal Audit
On the other hand, an internal audit is not independent of the company under audit. It is employees of the firm who conduct this type of audit.
In general, the duties of the internal auditor and external auditor are similar, and the processes used are the same. In fact, CPA auditing companies often rely on the information internal auditors gather as a jumping-off point.
Also, most large blue-chip companies have internal auditing departments, while smaller businesses often do not. So external auditors often perform extra duties where there is no internal auditing department.
5. Why That Second Opinion Matters!
An audit is the perfect opportunity for that much-needed second opinion on the management of your company’s finances. The basis of an auditor’s work is reviewing the facts, which is often exactly what a business needs.
Correspondingly, a business auditor will present their findings on any evidence supporting specific assertions. This could include investigating assets listed on the company’s balance sheet.
Unfortunately, the alternative is that business owners might inflate the dollar amount of their assets in balance sheets to appear better than they are. External auditors need to catch this to create an accurate portrait of a company, using the facts they find to approach risk to and from said company.
6. Why an Auditor Improves Efficiency Within a Business
As a business grows rapidly, an owner could lose his or her focus on what the original core is supposed to be. An auditor pinpoints any weak points within a company. If there are inefficiencies within the business, the auditor will highlight these.
An audit of a business helps the owner make improvements where necessary, as an auditor will review income and expenses within a business. (For example, the cost of labor and the rate of sales over a period as a business expands.)
7. The Advantage Of Using A CPA Firm
Running a company is demanding. And at times, it can prove quite overwhelming. The question is whether one task is more important than the next.
Choosing a CPA firm to assist with your annual audit is vital. An annual audit will help you grow your business, as well as help you make the right business decisions.
Furthermore, business audits take up time, and the benefits of outsourcing to a CPA firm are huge and outweigh the costs tenfold. Spend your time on other parts of the business while your hired experts get to work!
Being Ready For A Possible Future Audit
Take the steps now to ensure you are audit-ready for tomorrow’s eventualities. Large companies need regular auditing to ensure their processes and records are accurate. Most small businesses cannot afford to conduct internal audits, but it’s important to be prepared nonetheless, especially as your company begins to scale.
There are a couple of steps small businesses can take to make the process a straightforward one, eliminate confusion regarding your finances, business operations, as well as minimize errors.
Firstly, keeping excellent financial records will prepare your business for any future potential audits. Financial documents that are easy to find and easy to understand will put you in good stead. Keep all receipts, such as entertainment expenses and petty cash vouchers; every business expense needs a record.
Secondly, being organized is as important. Keep track of everything from income to expenses, plus having any business transaction and payroll information at one’s fingertips is a good idea. Electronic records are a great help.
Finally, use the services of a professional auditing team. The accounting systems and accounting software they used will put your business in good stead, and their years of professional experience will be much better than anything you try to do yourself.
Hiring Saddock Advisory Will Give You the Edge
Our secret to your success is the time and effort we put into our client relationships. Saddock Advisory is so much more than a service: we are proud partners in your success! We are a results-driven company ready to keep your business financials in the best shape possible.
Schedule a meeting today and find out how we can create value for your business.
Sources:
https://cloudfriday.com/small-business-audit
https://quickbooks.intuit.com/business-audit/
