How to Conduct a Comprehensive Financial Audit of Your Company?
September 20 , 2022
Audits have become integral to the developing world, where businesses want to optimise their functions and solve emerging problems. Everyone believes in the power of a thorough check and balance, from finance industries to restaurants.
If we look at the olden times, we have changed dramatically, from the manual to the digitalised way of examining organisations. This wouldn’t have been possible without technological advancements and increased demand for digitalisation. If you want guaranteed results, auditing might be the best solution. However, it highly depends on companies’ auditors or auditing agencies. The more skills, experience and knowledge they have, the better the results.
Many firms have even implemented a robust strategy by using an audit management system that helps schedule, monitor and control the processes. It even goes a step forward and examines the machines, tools and the workplace. There are many types of such systems available for different industries that are built keeping in mind their goals and needs. The same goes for financial institutes that require an advanced and accurate check of all the processes to increase transparency and reduce losses.
It doesn’t matter which industry a company operates in as each has a different department to manage the finances and needs a complete internal and external check. One can look at the IRS report for the current year’s statistics.
What Are Financial Audits?
Auditing can be of many types depending on the industry or the company one operates in, and accordingly, they implement an auditing mechanism. Here we will be looking at the financial audits and how they help companies maintain privacy, accuracy and transparency over the years to earn profits. Everyone might agree if we tell them that money is a significant element in the business model that can make or break any organisation if not taken care of properly. Trust us when we say that a strict finance audit plan can help firms keep out of prison. Thus, making it critical to inspect and audit often.
Understanding a financial audit can be complex as one needs to follow global auditing with a lot of nitty-gritty in even clauses. Before we dive deeper into finance and how it works, we need to understand what it actually means.
In simple words, it is an examination or investigation of a company’s financial status that includes financial statements, documents processes and any previous records. All the transactions made are recorded in a book that needs to be tallied to find the financial position of a business and compare it with the differences. Since it is a high profile work, organisations hire professional auditors or agencies with the experience to go through the accounts, internal policies and the company, and global standards. The sensitive files show any firm’s real picture and search for errors or wrong information.
Many are confused about the need for such an audit, but the reality is if a firm wants to avoid losses, it needs to conduct it. Moreover, it is not limited to financial institutions; any industry can do it for its well-being and to give the stakeholders a clear idea about the company’s financial position. Not to forget, many investors are only attracted after going through a company’s audit report. If it is reliable enough, they end up investing millions. Take the example of retail businesses; they, too, deal with finances and need to investigate to avoid fraud. Thus, we see most firms use a retail management system to perform routine tasks and audits to mitigate the chances of errors or fraud.
What Else Does An Audit Do?
Auditing is a broad term, and when associated with finance, it becomes essential to the company’s growth. Here, the main aim is to investigate, ensure accuracy, and increase compliance. The auditors hired are never a part of a company and have no interest in its operations. When the examination and verification end, they go through the documents and give their opinion on them, swearing about the integrity of the documentation with their signature. These people have the experience and knowledge to conduct both internal and external audits. In short, it ensures that the organisation Is not embezzling any money while all the rules, regulations and global standards are being met.
It may look like a complicated procedure if done manually, where several documents, books and journals are required to be audited. The companies often also do not have receipts or information about a few transactions, making it difficult to ensure accuracy. Therefore, companies now use an auditing app to streamline the entire process and generate reports in the end. All one needs to do is feed the data and let the application do its work. Not to forget, the primary focus is always on the financial statement.
How to Conduct a Financial Audit?
Conducting a financial investigation can be time-consuming and hectic for a lot of auditors. They have started believing in using digital ways to perform the audits better. Thus, increasing the demand for iOS and Android auditing apps or software reduces their work. Let’s briefly look at the steps taken by auditors to examine the financial statements.
Plan the Audit
Businesses always need to plan beforehand to avoid stressful auditing situations, and when talking about finances, they need a descriptive plan to follow for ultimate success. Hiring an expert helps in minimising the anxiety and chances of going wrong from scheduling and conducting to reporting everything. All of these lead to properly implementing policies to avoid unpleasant surprises. Thus, giving the company a chance to make any required changes before the actual due date.
Financing and auditing happen side by side to avoid any incorrect information. Here there are a lot of data points to implement the system effectively. It is one of the reasons why delegating tasks to the concerned department becomes vital for financial auditing. Here the head of the auditing team assigns tasks to different members in the finance department to improve communication. However, the work should be equally distributed and monitored for live updates. It helps them to remain on track and know the deadlines to avoid delays. Thus, reducing the overlapping or redundancy of work being completed.
Use Management Software
Technological advancement has improved how we work in the modern era. Auditors have started using audit management software or audit applications for iOS and Android smartphones to make the process easier. It enables firms to create and document information and assets in a centralised place, making it easier to find the correct information at the right time. This speeds up the actual process and improves the accuracy by a more significant percentage.
Keeping track of the changes has always been a hassle, but with the new automated way of doing it, financial auditing has become much easier. It has made everything faster, helping in tracking all the changes. Here if you have a new funding source or requirements, keeping a safe record of all the important information becomes more accessible for an accurate examination. Later, it should be presented to the person or company investigating before the actual process starts.
Availability of Company Heads
During the check and balance, it is critical for the company heads to be present to answer questions related to the finances or operations. It makes the procedure easier, streamlining the process efficiently to prevent delays. However, this doesn’t mean to be at the back of them. They need space to do their work. If a company uses the management or retail management system, it wouldn’t have to worry about the auditor’s location as everything can be accessed remotely. The same goes for the applications. But people usually need to conduct onsite audits for more extensive and significant processes.
Offer Reconciliation Statements
Businesses should avoid accounting conflicts; the best method is to conduct monthly reconciliations. If any issue arises, they can fix it in various ways before they go towards auditing. It minimises conflicts and increases the team’s confidence and trust, encouraging them to conduct efficient and accurate investigations.
Conduct the Audit
Once an organisation goes through all the above-mentioned steps, it can start with the audit process. It helps review all the information recorded throughout the year and take strict measures if any issues arise. Before that, firms must ensure all the crucial information is updated. Here a disclosure checklist helps the auditor decide the places that need to be audited or taken care of in today’s world. It becomes necessary for the reconciliation statement to match the trial balance. After this, one might be asked a few questions about the company’s finances for more verifications.
Remember, the data should match all the records with a clear organisation of debts, investments, revenue, profits, cash, assets, income and other expenses. This is often compared with past results to give a detailed insight into the firm’s operations. Though it sounds challenging, using apps has made it much easier to handle. However, few companies still use traditional paper-based solutions, resulting in inaccuracy and poor decision-making. Hence, it all comes down to smart auditing according to the company’s policies and international auditing standards. If any issue is highlighted, it is automatically assigned to the concerned department to take care of and reduce its impact by a greater number.
One should understand that every company belongs to a different industry, so their way of conducting audits will be very different from others. Therefore, the above-discussed procedure might not work for all. Moreover, many auditors have different styles of working. They might focus more on the current data and examination than comparing it to the previous results. Besides this, it even depends on the technology being used. The process gets shorter and more manageable when using an app, while a paper-based solution may take weeks or months to complete.
Auditing has changed how we work around the finance industry. Companies are more aware of international accounting laws and care more about recording transactions. It is not only limited to financial instates but to every industry that deals in money. Remember, money is one of the main factors why anyone works and getting losses is not what we are looking for. So in order to ensure accuracy in the recording of transactions or operations, it becomes vital for organisations to conduct an audit every six months or annually. Besides this, they can opt for monthly inspections to reduce the burden in the end. Develop an audit management system or auditing app now and leverage an automated system to ensure transparency.
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