Being audited is an essential part of the financial year. It’s the process whereby your business is comprehensively evaluated in terms of its financial records, operations and compliance with laws and regulations.
Depending on the company in question, in terms of size and type, audits may be conducted externally by independent auditors like professional accounting firms, or it can be done internally by qualified staff. Both types of audits serve different purposes.
The process is all about going through financial statements to check that everything is accurate and has been recorded properly. Furthermore, auditors assess the effectiveness of companies’ internal controls over financial matters. Finally, they need to ensure that the company is fully compliant with accounting standards, industry regulations and most importantly, tax laws.
Why Are Audits Important?
Going through the auditing process may feel tedious, but it’s a really important part of running a successful business, especially in the long run.
Here are the main reasons why business audits are essential:
- Ensure the accuracy of your company’s financial reporting. This means that stakeholders (including investors, management, creditors and regulators) are given reliable information for the purposes of decision-making and maintaining trust.
- Maintain compliance with laws and regulations relating to tax and other industry-specific standards. This helps you avoid fines or even legal action.
- Audits can help reveal weaknesses in a company’s internal controls, including any procedures within the company that may be inefficient.
- Remain vigilant and detect any unusual activity or fraud within the company by means of audits. They will help you find irregularities in financial records.
- Being able to show potential investors a successful audit will help boost their confidence in your business and its financial stability. Essentially, it’ll enhance the credibility of your business, leading to increased investment and more access to capital.
- Going through the auditing process will help you make sure that your tax filings are both complete and accurate.
Ultimately, audits are not only a legal requirement, but they’re also really helpful for businesses and have the potential to add value to operations and the longevity of companies.
How to Prepare Business Bank Account Audits
The best way to get through a business audit is to be as prepared as possible in order to increase your chances of it going well.
Make Sure You Understand the Full Scope of the Audit
Understanding what’s going to happen will help you prepare properly, so make sure you’ve established the following things:
- Why you’re being audited
- What the auditor is expecting to examine or verify and what they need from the business
- When the audit is happening and when they need to publish the results
- The time period covered by audit
- The standards that you’re expected to b eadhering to
Select Your Auditor
In most cases, your companies have the ability to select their own external auditor. Normally, it comes down to choosing one of the big firms (like Deloitte, PwC, KPMG or EY) or rather opting for a local or a specialist firm.
There are different reasons for selecting each one, so make sure that you choose the type of from that best suit your needs and that fits into your budget since you’ll be working closely with them during the process.
Review Employee and Payroll Records
Go through all your employee and payroll records to make sure that everything is up-to-date and accurate. This means preparing records of all employee contracts, salary payments, tax deductions and any employee benefits.
Organise Your Documents
An audit is basically about going through a whole lot of documents, from financial records to countless spreadsheets and other paperwork. These days, most companies also use financial accounting software, so the more information that is digitised, the easier it’ll be for the auditor to handle.
Now, the exact documents required will depend on your specific audit, but some of the main things you’ll need to produce include:
- Core financial statements
- General ledger
- Audit rail
- Annual budgets
- Loan documents and financial agreements
- Shareholder equity records
- Financial forecasts
Before your audit, make sure you get all these documents prepared and ready for evaluation.
Conduct a Review of Business Processes
During the auditing process, you’re going to need to be able to run through all your business processes with your auditor, so it’s essential that you have a comprehensive understanding of how everything works and that you can properly explain it.
This includes all of your internal control systems (who approves what and how payments are made), the company’s corporate hierarchy and management system and general business operations.
Conduct a Pre-Audit Assessment
Once you have everything prepared and ready, it’s always a good idea to do a pre-audit assessment – basically, a trial run.
The idea behind this is that if there are any big problems, you may be able to catch them before the official external audit is conducted.
