Financial audits are commonly considered investigations conducted by a certified public accountant (CPA). That’s one interpretation, and you may insist on it if your business needs a loan when you’re about to go public or heading towards another milestone that necessitates financial openness.
However, a financial audit can be done independently. In that regard, it’s a test of your financial self-awareness.
You’ll look for issues and assess what’s working well. Aside from discovering misappropriated monies, the audit may reveal ways to conserve money and save the organization from falling into an unsustainable financial state. As a result, it should be considered as time well spent.
Here are some tips for conducting a comprehensive financial audit that will give you vital information about your company.
Prepare Ahead Of Time
This should not surprise that planning is the most critical stage in preparing for your audit. You’ll need more time and resources in the weeks leading up to the audit. To prepare and set expectations for the audit, the entire financial team must ensure they have the time and resources to plan. This is an essential part of making the process as stress-free as possible.
Although year-end audits only need to be completed annually, you should be thinking about it throughout the year. Maintain as many up-to-date records and schedules as possible to lessen the time you need to prepare for each annual audit.
Brush Up On Your Accounting Knowledge
Accounting rules are often changing, impacting your firm’s year-end audit. Ensure you’re up to date on any accounting changes that may impair your ability to track data or operate. Keeping up with current industry norms will make the auditing process more straightforward in the long term and indicate areas where you may want more assistance to comply with legislation.
Professionals are frequently required to receive specific training. Therefore you must stay up to date during the year to protect your organization and its internal numbers. Attending accounting conferences can be an excellent way to stay on top of the latest developments, as they can keep your finger on the pulse. For instance, if you’re remote employees need to sign an i9 form for remote workers as per new regulations, ensure it’s done before the auditors come.
Organize Yourself for the Audit
Organizations may prepare for an audit in various ways, beginning with establishing a calendar with the auditor, which should include any upcoming deadlines. Get a complete list of the information and documentation that the auditor expects to see, and establish a plan to prepare that information for the audit.
The audit requirements list, bank statements and reconciliations, inventory records, and trial balances are just a few documents the auditor may ask for to streamline the process.
Deal With Any Issues That Arise Early
If your company performs a particularly unusual transaction that your auditor is likely to notice, reach them as soon as you can and give the necessary details. This way, towards the end of the year, you won’t have to go through months of old paperwork to figure out what happened. To minimize audit delays, ensure your company adheres to all of its financial contracts.
Seek Technical Assistance
Before an audit, a business can store and organize documents using online accounting and invoicing software. These solutions let your financial staff focus on more critical activities by automating most of the file organizing effort. Even if a business does not use online accounting software, it may scan and upload paper files to cloud-based storage to be accessible at the end of the fiscal year.
Take Notes on Past Mistakes
Audits seldom go perfectly, precisely the first time you do them or during a year when the business has gone through many changes. Many year-end audits will include revisions, and they might be a great place to start for drawing more definitive findings.
Arrange a meeting with audit participants and decision-makers to discuss how you can avoid former mistakes and increase the precision of this year’s audit.
Share the Responsibilities
Every element on the schedule should be allocated to a specific individual, who will break down the smaller tasks that must be completed. The whole process becomes much easier to handle and much more quantifiable for the team and the decision-makers.
You should set clear internal timelines for completing tasks, which should be a reasonable amount of time before the auditor’s hard deadline. This should give you enough time to put out fires and deal with any last-minute issues. Your timeline should begin with the most challenging or time-consuming areas wherever possible.
Take Charge
Don’t be afraid to ask questions if you are unsure about certain items requested by the auditor. If you ask them questions before the audit starts, you’ll avert any needless inconveniences. In addition, you should speak with decision-makers or individuals you will need to rely on for specific details to finish the audit preparation. You and they must communicate openly and clearly about what you require of them.
Final Thoughts
The majority of organizations do not go out of business in a single day. Instead, problems emerge gradually and frequently worsen over time. Making the wise decision to audit your company helps you discover possible issues and seek expert help in resolving them. You’ll also have a deeper understanding of which actions help you succeed.
