Financial audits are a mandatory part of the regulatory and compliance requirements for every registered company. However, just because they are a necessity, it doesn’t mean they are straightforward to get by. Every tax season, businesses struggle with getting their audits done, which adds to the strain on their resources.
With a little bit of organizing and preparation, businesses can take strides in simplifying the process for themselves. A successful audit minimizes the chance of adjustments or other revisions popping up, decreases the fee for audits moving forward, and allows the company to extract greater value from the entire audit process.
What is a successful audit?
An audit is not just about proving the legitimacy of a business’s cash flows and plugging any financial loopholes that may exist. There are various other benefits that can be obtained from this procedure, including identifying excessive overheads, pending receivables, long-outstanding payments, and other elements that can be addressed to improve the financial health of the company.
In order for an audit to be considered successful, it needs to fulfill certain objectives for the company. In essence, when the outcome of an audit leads to a corrective change in the company’s course of action, the audit can be termed a success.
Here are some tips that can help your business get through the auditing process seamlessly:
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Preparing is essential
Many businesses linger on with the audit until the deadline is right around the corner. This is never a good idea. Not only should you ensure you get the PBC (Prepared by Client) checklist to your auditor at least a month in advance, but you also need to be aware of relevant schedules, changes to taxes and regulations, and a host of other relevant information to avoid getting an IRS letter 525 if your audit was conducted by mail or 915 if the audit was conducted in person. This letter outlines your options if you disagree with the examiner’s adjustments, which can complicate the entire process.
Ensure you take the necessary steps to compile a comprehensive PBC that includes every spreadsheet, schedule, and document the audit firm needs to perform the review effectively. You wouldn’t want to drop surprises on the financial experts after they’ve begun working on your books because not only does that become a hassle for them, but it also puts your business in trouble.
It is also essential to work closely with the auditors during the process, facilitating their requests for information and discovering various insights about the company’s financial performance. Through constant involvement, you can stay on top of things and ensure no problems spring up out of the blue during the audit.
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Assign responsibilities within the company
When it comes to audits, a lot of paperwork is required. Many companies forego this aspect during the year-end closing, which means that their employees have to go through the process of creating the audit documents again when the time comes. Not only does this double the workload, but it can also affect employee morale.
This is why it is important to delegate properly. Pick out the employees in the finance department who handle transactions and consolidation of the books during the year-end closing. Ask them to prepare supporting documents for tax purposes while they are at it. Also, it is crucial to ensure that none of the work is overlooked or duplicated by two or more people working on it simultaneously.
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Make your data storage digital
Digitalization has become the hallmark of modern businesses, with a majority already taking most aspects of their operations online. The use of sophisticated tools and resources helps streamline the entire routine processes for an organization. Most of all, digital data storage allows all pertinent information to be readily available to all stakeholders involved in the audit.
You can leverage digital data storage to make your firm’s audit a success too. Sending over the PBC via mail is a hassle and an inconvenience, as many of the files exceed attachment limits. On top of that, the constant back and forth means that many of the files get lost in the chain of communication or clutter of work. This only complicated the process even further.
Utilizing a digital data room is an effective solution since it makes sharing files between the business and the auditor much simpler. One thing to be careful about is the naming of files. Instruct all employees with access to the data to follow a consistent naming format to make it easier for both sides to locate and use the documents that they need.
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Audits are all about timelines, schedules, and set dates. Missing a particular deadline can land the business in hot water. Therefore, it is important to set up a calendar that is shared with all relevant teams. This calendar needs to have all important dates marked with strong emphasis given to the most critical ones.
The calendar ensures accountability amongst all team members and the auditors while also allowing them to keep a check on their respective deadlines. Also, when developing a calendar, add some buffer time so that you are ready to deal with a task that takes longer than expected or gets delayed because of unfortunate circumstances.
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Communicate comprehensively and effectively
Your entire organization needs to be aware of and understand that, until other demands become urgent, requests for audits are the professionals in finance and accounting’s top priority, particularly at the time of the year when taxes are due. In addition to internal and board requirements, regulatory and scrutiny requests that are sensitive to time may take preference.
Additionally, since any accounting and financial organization needs to devote a significant amount of time to completing the year and the ensuing audit, it is crucial to be cautious about time and obligations. You can set the audit up for success by communicating effectively across the board and ensuring all other commitments are kept at the bare minimum during tax season.
Conclusion
A successful audit lays the groundwork for a lot of benefits and opportunities in the company. It is a chance to streamline a host of business functions while improving efficiency as well as productivity throughout the firm. However, ensuring whether an audit will be successful or not is solely up to you and the preparations you make toward achieving this objective. In the absence of adequate planning, an audit may never be able to generate the results it is intended to.