Everyone knows that audits are important, but almost no one wants to be audited. That’s quite understandable since preparing for an audit can take up a lot of time that could otherwise be used for something else. However, many businesses often struggle to prepare their documentation for these important events, even in cases where they do have an accountant on board.
While any good accountant will get things done for you, your own understanding of the intricacies of financial audits will reduce your business’s burdens over the long term. Indeed, if you want your business to pass an audit with high marks, you must make it a priority to help your accountant do their job.
Let’s look at the simple things you must know that will make it easier for you and your accountant to clear your audits and, in the process, lay the foundations for continued business growth:
1. Understand the Purpose of an Audit
The primary goal of audits is to assure stakeholders that all business is being done above board. Though audits are usually prepared specifically for investors, lenders, and tax authorities, your audit results can, nonetheless, also indirectly affect customers’ perceptions of your business.
Knowing that audits should not be seen as a hassle but, rather, a necessary way to generate genuine public trust. With that mindset, you can begin to see audits as a critical requisite to growth, making them less of a chore to comply with.\
2. Organise Your Financial Records
Before the audit begins, it is crucial to organise your financial records. If you don’t have the bookkeeping experience or the resources to do this, engage with small business accountant Queenstown services that can help you with such a critical step. With well-organised records on hand, you’ll be able to streamline the audit process, saving you time and guaranteeing that you can get back to other priorities ASAP.
3. Engage with Professionals
Comprehensive audits may be too complex for in-house teams to handle, particularly at short notice. In these instances, the only way to guarantee success is to engage with a qualified accountant or auditing firm. Their specialised expertise will prove invaluable when it comes to identifying and resolving potential issues, even in challenging situations.
4. Familiarise Yourself with Auditing Standards
In New Zealand, audits primarily follow the standards set by the External Reporting Board (XRB). However, other standards may apply depending on the scope of your business. In any case, familiarising yourself with relevant standards for your business size and industry should help you grasp and understand the auditors’ expectations, enabling you to align your reporting and wider business practices accordingly.
5. Learn to Perform a Self-Audit
Before any scheduled official audit, have your team go over your financial statements, perform reconciliations, and verify the accuracy of your records. Running these self-audits might use up some of your resources, but they will help keep your records free from any glaring discrepancies and reduce the risk of serious penalties. As your business grows, you may even want to run periodic self-audits to help ensure its continued financial wellness.
6. Review Your Internal Controls
Your self-audits should also review how your business handles financial data. The right internal policies make it far easier to ensure accurate financial reporting and prevent fraud.
As part of any internal or external audit preparation, you must evaluate your internal controls and take concrete action to address any weaknesses. This may involve implementing segregation of duties, tightening access controls, or improving documentation processes.
7. Be Prepared for the Auditor’s Questions
During the audit, expect the auditor to ask questions about your financial statements, transactions, and internal controls. Do your homework, so to speak, and develop a comprehensive understanding of your business operations and financial records. Provide the necessary documentation to support your answers, and be transparent in your responses.
8. Learn from Past Audits
For newer businesses, it’s almost expected that some mistakes will be made in their first few audits. Though you don’t want a repeat of your failures, you need to look into the struggles encountered during past audits, including any adjustments made as well as key internal control recommendations. Using your mistakes as learning experiences can make future audits less stressful and more efficient.
9. Stay in Touch with Your Auditors
Prioritising open communication with your auditors throughout the year will help you stay on top of any policy changes that might affect your record keeping. To reduce confusion, designate a point of contact within your finance team to liaise with key auditors. This contact person should also be the one to communicate any needed changes to you and the rest of your finance team.
Turn Audit Anxiety into an Opportunity for Business Growth
For smaller businesses, financial audits can be somewhat disruptive since they take away limited resources from core functions. Still, on your part, they should be viewed as a necessity for guaranteeing the accuracy of your records.
Without trustworthy records, it can be very difficult to understand the true state of your operations, let alone ensure tax and regulatory compliance. Furthermore, if you envision growing your business through outside capital injections, it’s necessary for you to become comfortable with the audit process.
Fortunately, the hassles of audits can easily be resolved with the help of the professionals at Target Accounting. Through the help of our team, your audit experiences can be transformed from something you dread to events that ultimately contribute to the long-term success of your business. For service and advice that will allow you to stay on the mark, contact Target Accounting now.