Is it Time for an Audit?
We have all heard the term audit, but what does it mean?
An audit is a procedure used to examine and review the financial records of a business. An audit helps businesses improve their operations and performance and also provides assurance to the business owners.
This blog will look at why you should get an audit done as well as how you can get one done.
What is an independent audit?
An independent audit is conducted on behalf of a client but it is prepared in a manner that doesn’t create any bias towards the company. The goal of an audit is to give the client a fair assessment of the business’s current financial status. An independent audit reviews the business’s finances based on multiple aspects of the company.
Why do you need an audit?
The word audit has a very negative connotation. We associate it with something that we don’t want to do, something that is very time-consuming. But an audit is simply a way for you to get an unbiased view of what is going on in your business.
An audit is not the same thing as an evaluation, but an audit takes the information from an assessment and uses it to improve your business. It allows you to identify the strengths and areas you need to improve on in your business. Instead of trying to fix everything at once, you can fix it in stages.
When do you need to begin an independent audit?
– An investor or bank requires you to do so
– Your company’s annual sales hit $1 to $2 million
– You decide you want or need to raise funds.
– You are considering selling your business.
If you intend to have your financial accounts audited in 2022, you should partner with a financial expert and meet with your audit team immediately.
It is important that you have sufficient time to educate your financial team on your business concerns and to fulfill their audit request list.
Getting Ready For an Audit
Theoretically, you must always be prepared for an audit. Thus, you would not have to scramble to organize your finances at the last minute. If you are disorganized, the audit will be more difficult than necessary.
An audit’s fundamental purpose is to verify financial records’ accuracy. For an auditor to perform this task successfully, you must have the necessary paperwork and records prepared.
Journal entries -Receipts -Bank statements -Invoices -Financial records -Credit card statements
These are some of the items you should begin to collect. All of your documents should be organized chronologically. Depending on the type of audit, you must have all records from the last three years available.
Auditing firms may give profit-making non-profits “prep packets” outlining what they want to examine.
Steps of an audit
An audit is a detailed assessment of the books of a company or a person.
A financial audit involves the examination of a company’s financial records and reporting by an independent auditor.
The auditor examines the general ledger, supplementary work papers, and all supporting documents for adherence to the Generally Accepted Accounting Principles.
The auditor then compiles an audit report which includes the auditor’s opinion about whether the financial statements are presented fairly in accordance with accounting principles generally accepted in the United States. An audit of financial statements can provide an independent third-party opinion of the financial statements.
After an Audit is Finished
What happens following an audit?
After the audit is complete, you can resume normal operations. As the audit report indicates, you may need to revise some of your financial documentation.
You must continue to keep a careful check on your financials even after the audit is complete. Ensure that all of your paperwork is in order so that you are prepared for the next audit.