An audit is the perfect opportunity to review business financials to make sure everything is running smoothly. A certified public accountant (CPA) often conducts the process. This is when the business gets a second opinion from a financial expert (usually an outside party of the company) on how financial operations are proceeding.
While companies big and small may dread having an audit completed, it is crucial to the future of the business. An audit can provide new insight for the business to take into consideration. It is more than just checking and crunching numbers to make sure accounts are balanced and funds are being used for their intended purposes.
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When Does a Business Have an Audit Completed?
An audit for a business is like a yearly physical checkup for people. An audit is basically a financial checkup for your business. Most businesses conduct an audit once annually around the same time. This helps identify patterns while making it easier to compare data. Because cost factors for completing an audit may be an issue for the business, those with a CPA may have them come and review the books on a regular basis and provide guidance and advice with their reporting.
When audits are performed this information gets recorded with business financial statements. Therefore, it makes getting them completed a necessity for inside and outside parties that rely on financial statements and other related data when making significant business decisions. Shareholders of the company will gain piece of mind the business is functioning properly.
In other cases, the law where your business entity is established may designate when an audit should be performed. When business transactions are questioned by outside parties or upper management, it may be time to consider having an auditor review company financials.
How Does a Business Prepare for an Audit and What Happens During and Afterwards?
Whether you are a small or large business entity, private or public, there are several actions you can take to help your business stay organized and ready. Business records maintained should be neatly organized, complete, and accurate. Be aware and up-to-date on tax obligations required to be met. File tax documents in a timely manner with accurate information. Review the audit process beforehand so you know what to expect.
The process takes a considerable amount of time but details such as expenses, credits, deductions, tax liabilities, depreciation schedules and more will be reviewed in further details. You can review areas of weakness and discuss practical solutions to implement. Keep in mind you may be required to keep records related to your business audit for a certain number of years before discarding them.
When the audit is complete the auditor will review their findings with the business owner through a detailed report. They may explain information you may or may not agree with. Problems within the business may be discovered that you have no idea existed. You may be advised about tax obligations or adjustments that can be completed.
So How Does the Business Benefit from the Audit?
Completing an audit shows your company can be trusted and reliable. There are companies in which their reputations build around how well they manage their assets. When a company is doing what they are supposed to, the audit should go off without a hitch. It shows the company is fulfilling necessary responsibilities and obligations.
Business owners are more educated about their finances. They get in-depth reporting on how well their decisions have impacted the business. They may learn ways to improve accounting processes and look at how to reduce errors. There are accounting firms that offer additional advice and educational materials for companies when they complete an audit. Businesses continue to develop professional relationships with their accountants or accounting firm.
Businesses seeking a loan from a lender may be more likely to get approved if there company is audited on a regular basis. Companies send a strong and positive message when they are willing and welcome the opportunity to be audited. It is how you look at the situation and how you can make your business benefit from the process. Stakeholders are not the only party that benefits from an audit. Suppliers, lenders, customers, and tax authorizes also benefit as it helps to strengthen partnerships while maintaining company efficiency.