Financial audits analyse and report on the intricacies of a company’s financial situation. Public companies undergo audits on a regular basis and external audits can also be undertaken with private businesses too. By performing an internal audit on your own books, you can discourage fraud and theft while preparing for an external audit. Below we explore this process.
By planning carefully in advance, you’re more likely to undergo an efficient audit. Begin by establishing your goals for the audit – everyone involved can prepare in advance if they have clear expectations. From there you need to have a process lined out for the whole financial team to follow. If external advisers are helping your financial audit, then you need a member of the financial team as a point of contact too.
Review the accounting system
Evaluating the accounting system is a key component. You need to ensure that all accounts are present, while also seeing that T-accounts are efficiently posted to the general ledger. Plus, the system needs to have the framework in place to correct human errors.
Review internal controls
Internal controls are your company’s rules and processes to safeguard the integrity of financial information. These need to be checked to establish the company’s fraud threat level. For this you’ll need to assess employee roles, protection of accounting software and the safety of any physical money.
Compare internal and external records
Shareholders and outsiders will be uneasy if your internal and external records don’t match up. Cash holdings, income and expenses all need to be compared against each other to ensure that there’s consistency across the board.
Organise the data
As the audit progresses, you’ll need a way to organise the data you gather. Here, it’s best to create folders and sub-folders for different transactions and categories. By categorising data into different groups it’ll be easier to navigate the audit results.
Evaluate the results
Once the audit is complete and a report’s submitted, it’s time to evaluate the results. A meeting between the auditors and management can be instructive. It’s also worth reviewing the audit process so as to improve and become more efficient in the next cycle.
A financial audit can be an exhausting process for your business. But by following the process step-by-step, you should be able to run an efficient audit and maintain financial integrity.