How to Prepare for an Audit

Every year, many organisations must prepare for an independent audit of their financial records. They are necessary to verify the accuracy of those records and ensure that they offer a fair representation of the business’s state. An audit can be a daunting prospect and the cause of a lot of stress, but planning for it can make the process smoother.

Preparation and planning are key for a successful audit. If you need help preparing for an audit, read on.

Audits Explained

There are three different types of audits that can be performed. Firstly, external audits, which are performed by an external third party. They are thought to be more impartial as external parties hold no biases as there are no conflicts of interest.

Then there are internal audits, which are performed by the employees of the company that is being audited. They are rarely distributed externally and are mainly used for internal purposes.

You can also be audited for your online business. Therefore, it is recommended you find reputable E-Commerce accountants if you operate over sites like Etsy, eBay or Shopify.

Lastly, there are governmental audits that are performed by various government entities or agencies to ensure that the prepared financial records do not misrepresent the company’s finances.

The Importance of Audits

Auditing is essential for companies who wish to maintain trust and efficiency within their markets. Without auditing, there are companies who would seek to misstate their records to make themselves appear more profitable or successful than they are.

Investors, creditors, and stakeholders use financial statements to make decisions which is why they should be prepared in accordance with accounting standards. If the information is false or untrustworthy, it undermines stakeholder’s willingness to engage with the companies.

Preparing for the Audit

Preparation is vital to ensure that the company does well. The auditor needs to give their stamp of approval on the financial records. The process can be arduous, and some businesses choose to outsource to other companies and utilise their audit services.

For example, for Scottish businesses, they may choose to enquire at Azets Glasgow. Using another firm simply means that you get to benefit from their expertise and knowledge on the subject. To properly prepare for an audit, there are a few things you should do:

• Plan first; it is crucial. Planning properly for an audit can take weeks or even months, depending on the complexity of the records. Allocate additional resources to the planning process. Try to keep records up to date throughout the fiscal year to help alleviate pressure nearer the audit. Review the list of the auditor’s requirement and assign these responsibilities to capable team members and give them a due date. Organising the data for the auditor’s arrival can help the audit pass by quickly with minimal disruption.
• Be aware of all necessary accounting standards. This also goes for any legal or regulatory requirements. They can be updated anytime, so it is essential to familiarise yourself and any relevant team members. Staying up-to-date saves time and effort when ensuring that your records are compliant.
• If your business has been subject to an audit previously, any changes since then will need to be considered. Material changes can affect the process, such as any new projects receiving investment, government support or grants. Non-financial changes may also require consideration, especially internal control systems or account management. It is also worth reviewing the notes from the previous audit. Did they leave any suggestions, and if so, have you implemented them? This helps t ensure that past mistakes aren’t repeated.

In Conclusion

Audits can have long-term effects on your business, and so it is critical to comply with them. This compliance doesn’t have to be stressful; preparation and planning ahead can make the audit process easier and quicker with the least amount of disruption to your business.