The word ‘audit’ often strikes fear in the minds of businesses, many of which immediately associate this with taxation, levies and self-assessment.
However, financial audits can also be highly effective planning tools when used proactive within your business, particularly if your company is experiencing a period of sustained growth or transition that may compromise reporting efficiency.
But how exactly can an audit help your business venture, and what should you avoid when preparing for this?
The Benefits of Carrying Out an Internal Audit
Let’s start by considering the advantages of conducting an internal audit, which can involve multiple stakeholders depending on the size of your venture and the precise challenges that the company is facing. Here are some of the general benefits:
- Identify and Resolve Issues Ahead of Time: When you carry out a proactive internal audit, you can identify potential fiscal or reporting issues before your company is inspected externally. This creates an opportunity to correct these and minimise potential complications in the future, ensuring that a subsequent financial audit runs as smoothly as possible.
- Understand the Key Focus Areas of an Audit: When commissioning an internal audit, you’re helping the auditor to focus on the most important elements and ensure that they receive the appropriate levels of attention. In a financial audit, for example, it’s often reporting processes that create gaps in knowledge and documentation, so this should be a priority when analysing your company finances internally.
- Ensure That External Audits are Quick and Painless: Ultimately, your internal audit is a dry run for a potential external audit in the future. So, the data and insight accumulated can definitely assist in the coordination of any subsequent work carried out by specialists, ensuring a quick and seamless process that minimises disruption within the business.
What to Avoid When Preparing an Audit
When it comes to preparing for an external financial audit, accurate reporting is arguably the single most important consideration.
So, having inadequate or inaccurate records represent a huge no-no when it comes to auditing, as does failing to implement quality and system management requirements over an extended period of time.
On a similar note, a fundamental lack of documentation is also a huge issue when dealing with auditors, as this can make it hard to verify your statements and accurate incomings and outgoings throughout the business.
So, when you conduct an internal audit and manage this process from beginning to end, you’ll need to focus primarily on creating a holistic and relatively simple reporting process.
At the same time, you’ll need to ensure that all transactions and invoices are thoroughly documented, with easily accessible and legible bookkeeping records making the auditing process considerably easier.
Be sure to install a review process for your documentation and reporting processes too, as this helps to ensure their viability companywide and as the business continues to evolve over time.