Guide to a Successful Financial Audit for Businesses
Throughout the years, working and collaborating in financial audits, I have learned quite a lot when it comes to being prepared.
What is a Financial Audit?
An audit is an official inspection of a business or individuals financial records, usually conducted by a third party. Audits are conducted for many reasons, such as stopping fraud before it escalates, increasing the business’s reputation, identifying new business opportunities that may have otherwise been missed, etc.
The most crucial step to a successful audit is being prepared and understanding the auditing process. Keeping up with new accounting standards; learning from past auditing mistakes you may have made; and making sure your company is in line with regulations, standards, and requirements for your line of business are all easy ways to make the auditing process go smoother.
Analyse and Organise
Having all of your financial and tax records organised ahead of the audit will allow you to get through the audit faster. Using previous tax receipts to reconcile tax discrepancies in your records will help you stay on top of discrepancies before they pop up with the auditor, so will combing through your most recent deductions and credits claimed.
There will be a lot of data to go through, which is why having a folder system will help keep you organised. Separate information relating to things like payables and expenses, cash, fixed assets, debts, investments, etc., into different folders. This way, you can also compare your internal records with your external records for the corresponding folder. Just be sure to keep all your folders secure and protected.
Get a Clear Picture
You should feel confident asking questions of the auditors; you must have a clear picture of the information the auditors need to avoid extra fees. Once you have an idea of all the information the auditors need, delegate them to different members of your financial team with a deadline. This way, they can review the information and reconcile any discrepancies, so the auditor receives accurate information.
Make sure your team starts with the most complex records and information, if possible, so they can spend the most time on them. It is also essential that you and your team conduct an audit of the financial records yourselves during this time.
Attend the Auditors
Despite having all the information requested, the auditor may still request additional information during the audit or request an explanation for specific records. Make sure all your key financial and audit team members are available during the auditor’s fieldwork, postpone or cancel any unimportant meetings.
Even after the auditor has finished their fieldwork, keep in contact with them. If there are any open items, set a deadline with the auditor for information disclosure. If the auditor is willing after their fieldwork, plan a meeting with the board of directors and the company’s finance committee and make sure the auditor has all the information on the meeting’s time and place.
Also, consider doing an after-audit meeting with all the team members involved in the audit. This is a good time to disclose the audit results with your team and get feedback for the next audit.