Accounting Audit: Bad for Your Business?
Aside from the word bankruptcy, there is probably not another word more feared by businesses than audit. However, an accounting audit is not necessarily a bad thing for your business. In fact, in some cases, an audit can actually help your company save money and eventually increase your company’s overall profit and performance.
There are basically two forms of audits: an internal audit and one conducted externally, typically by the IRS. If you are a professional business maintains accurate and honest records: neither audit should be feared. In fact, both types can help highlight areas where your company could improve.
The Benefits of an Internal Audit
Hiring a professional company to conduct an internal audit is typically an extremely effective practice. Internal auditors are objective individuals who will take the time to evaluate and question each aspect of your business. At the end of their review, they will provide your company with a list of recommendations. It is ultimately your company’s decision on whether or not these recommendations should be implemented.
Internal audits can provide the following for your company:
- A strong, organized accounting system
- Eliminate or reduce the risk of internal fraud
- Highlight potential areas of loss and/or missed revenue
- Decrease the possibility of an external audit
However, internal audits are dependent on the auditor’s ability to recognize whether the information being provided to them is accurate and complete. To increase the success of your accounting audit, hire a company that is familiar with your industry’s specific needs and challenges. Once hired, be certain to give them enough time to thoroughly evaluate all aspects of your company.
The External Audit
External audits are probably one of the most feared items by all businesses. However, there are ways to come out of this process successfully and hopefully a bit more informed.
When you are notified of an external audit, become familiar with all financial aspects of your business. Set up a meeting with your accountant and discuss your company’s tax return and where all of the backup material is retained. When the auditors arrive, answer all questions honestly and readily provide them with the information that they are requesting. Ideally, the auditors will be satisfied with your response and their file can be closed.
In general, an accounting audit is not a bad thing for your business. In fact, a thorough internal audit can actually help your company increase its overall profit.