How Auditing Can Help Your Business

 Have you ever wondered how auditing can help your business? It has multiple benefits.

What Is an Audit?

Before discussing how auditing can help your business, let’s briefly itemize what an audit is.

During an audit, an outside party comes in to examine the financial statements of a firm. The purpose of bringing in outside companies is to ensure an accurate, unbiased, and fair look at a company’s books: the accounts, vouchers, and other financial documents.

In many companies in the United States and Europe, a yearly or quarterly audit is a standard practice. Many sectors set forth legal requirements for periodic audits, as well.

Auditors look at quarterly and yearly statements for several reasons. They verify the accuracy of the mathematics. They verify that the statements are true: that monies actually came in and were disbursed, for example. Auditors will ensure that no asset or liability is either overstated or understated: statements of value are monitored to make sure they are true and current. They will establish that all taxes have been paid in a timely manner. They will verify the capital held and the revenue.

Audits can also establish that a company’s internal controls, whether accounting or in another department, are sufficient for its size and complexity.

Companies who have had an audit performed have enhanced the trustworthiness of their financial records. They have ensured transparency and a lack of bias, two qualities that are highly valued in international business.

How Auditing Can Help Your Business

Because of the trustworthiness and transparency, audits can help your business in several different ways.

Audits can help you maintain your accounts in good standing. They can either confirm that your internal controls are sufficient, or indicate that you need to augment the existing controls. This can be especially helpful for companies whose business has been rapidly growing, and whose accounts and controls may not have kept pace with the size.

They can ascertain the official determination of profit and loss. Separating profit and loss is often complicated, and outside auditors can ensure that statements of profit and loss are accurate. Taxation issues can arise in the determination, and an audit ensures that they can be handled smoothly.

Audits are invaluable in detecting and eliminating any errors that have occurred in maintaining the financial records. It can also discover any fraud.

Business performance is quantified comparatively. Financial statements are compared year over year and quarter versus quarter. An audit ensures that the comparisons are accurate.

If a business plans on growing or changing its focus or composition, an audit helps ensure orderly and planned growth. If a business wants to obtain a loan, for example, lenders often want to see an audited business statement. If your business is looking to expand via funding other than a loan, such as a sale or stock offering, funders are likely to require an audited business statement. If you want to divest a segment or purchase part of another company, audited business statements are likely to be required.