If you run a business under a private company, you will need to perform a financial audit for the year-end reporting of your business. These audits are stressful yet effective to establish the reliability of your business in the eyes of entities like government agencies, investors, and banks. Moreover, if your company is registered, you will need to perform a financial audit by law. So, for this never-escaping duty of your business, you can find easy and effective ways to accomplish it without stress.
In addition, small businesses, public corporations, and private companies need to undergo auditing by independent audit firms. In this comprehensive article, you will get enlightened with a guide to understanding the private company audit requirements and the steps to perform them effectively. So, let’s dig in for proper insight.
With the proper guide to conduct a financial audit, you will enjoy a smooth auditing experience at the end of your financial year. So, follow these few tips and steps to conduct a financial audit for your company successfully.
The primary reason for getting over-stress from your financial audit is the failure to set a proper plan for it earlier. Having a good financial audit plan beforehand will help you to minimize stress and anxiety. It is always recommendable or advisable to have an expert professional for conducting your audit to work on the other aspects of your business. If you engage yourself in the audit, you will have to perform all the work independently with a team of accountants. But, this can be time-consuming and may result in an error in your audit.
So, make an extensive plan for your audit program. You will have to keep updated reconciliation statements and up-to-date schedules of your business throughout the financial year. You can appoint a trusted and active member from your finance department to assist the auditor with all accounting details and make necessary communications throughout the fiscal year. This will help you to stay updated with the latest changes in accounting policies and standards to prevent any surprises at the last moment. Having a separate plan throughout the year with proper communication will give you sufficient time to work on any change and get effective audit results in the end.
The best way to do something successfully is by learning from your past mistakes. Similarly, you can learn from the past errors of your financial audit to further avoid them and have a stress-free auditing experience. You have to carefully evaluate and analyse the mistakes from your past audit, adjustments made to them, and make any changes, if necessary. You must have a proper plan to address your past mistakes and work on them. Moreover, you should discuss the areas of improving your financial audit with your auditor by keeping those mistakes in mind.
If you’re about to have a financial audit for your business within a few months, you will have to check for any updates with the legislative and regulatory requirements. Moreover, you will have to take all the latest updates of accounting standards and norms into consideration for your next year’s financial audit. If ignored, you will face severe issues while performing your audit.
The time needed to make changes for the updates depends on the type of update. For example, changes in the accounting standards will require you to change the documentation of accounts such as the balance sheet, cost sheet, etc., to manage the data efficiently. In some cases, the changes can be technical and software-related, so your auditor and business accountant will need the training to meet the requirements.
In your financial audit checklist, remember to evaluate the audit implications of any changes made to your business. For instance, if you discontinued a product or service, then it will lead to a decrease in obligation. A few more factors require your business to make considerations with new reporting and accounting standards. So, if there’s a change in your company’s hierarchical or organizational structure, or recent grant approval, or a new internal control system, then discuss them with your auditor while planning for the financial audit.
One of the best ways to undergo an effective financial audit is by analyzing your company’s tax return and records. You must keep the tax records of your company for seven years. You can get the tax receipts of your business from the ATO and use them to make reconciliation with the tax records. Moreover, you must analyze your business’s tax credits and deductions to adjust your financial statement.
You must store your audit data for analysis in the later years. Sub-folders or transaction cycles can be used to organize your audit data effectively. You can classify each of your data into different categories like fixed assets, debts, expenses, cash, etc. This storage and organizing of data will help you get maximum accuracy by comparing your income, fees, and cash against the external records stored by your accountant.
But, you have to ensure the safety of your paperwork, schedules, social security numbers stored in your business network. You can use accounting software that automatically handles your paperwork and schedules while writing new reports or financial statements.
It is crucial to know the requirements of your auditors with clarification. If you request to clarify the needs of your auditor before your financial audit, you will be able to delay any penalty charges and execute your audit smoothly. You must be comfortable asking questions to your auditor to make quick and necessary changes or adjustments. You can take the required information about the footnote disclosures and accounting norms like the use of depreciation, contingencies, commitments, etc. If you know what your auditor wants, you can assign those items from the checklist of your schedule paperwork and statements to personnel from your finance department for review within the due date. Also, ask them to make necessary adjustments for errors and omissions, if required.
So, to sum it up, you can escape the complexity and stress from your financial audit in these ways. So, ensure to follow these ways to improve your audit efficiency and get a better reputation and enhance your business.