An audit and auditor’s report is a third-party document. It is a reflection that the company’s financial statements are compliant with the law and free from material misstatements.
Banks, creditors, and regulators can require an audit of your company’s financial statements. If you are looking for finance, loans, surety, or selling your business.
Types of Audits
There are three types of audits; external audits, internal audits, and internal Revenue Service audits. The auditor includes the opinion in their report when a Certified Public Accounting firm does the external audits. They follow a specific set of standards, independent from the company. The independent third party ensures they can be honest in their opinion.
The company employs an auditor to do an internal audit. Management and the board are the only people to get the results.
The Internal Revenue Service Audits are there to review the companies Tax returns. They select at random to do spot checks on companies to assess compliance.
Receiving a clean audit
Show your partners, banks and clients that you are legal by getting a clean audit. Running a clean and compliant business can make or break a relationship. One day, if you sell your business, a series of clean audits can increase trust.
Using audits to improve your business
If you do internal audits, you can use the outcomes to identify hiccups in your business. You can use the insights to make improvements to processes and internal systems. Audits can highlight the good in your business but also the downfalls which can then be rectified.
What audits include
All companies should consider doing an annual audit every year. It would include the income statements, cash flow statements, and balance sheets. Banks and lenders can ask for these as part of any due diligence. Some companies need to do them as a legal requirement. If you are tempted to fudge your statements to avoid paying tax or commit other fraud the criminal activity can ruin your reputation.
Compliance and Governance
Regular audits on your business, shows where you can improve and remove the anxiety when you need to submit your financials.
In conclusion, you need to consider doing compliance checks on your business with regular audits to highlight any misdealing.
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