The mention of the word ‘audit’ drives chills in many people’s spines. Many people relate this to suit-wearing ‘professionals’ who force their way into your business with just one purpose, find errors in your bookkeeping records.
The actual definition of an audit is to make an official inspection of a company/organization’s record of accounts. Although an independent audit body mostly does audits, you have more than one reasons why you can still have an internal audit of your business. The best time to call for an internal inspection is towards or at the close of a financial year. Outlined below are some of the reasons and benefits of having an internal audit.
1. Accuracy
An internal audit can help identify any errors with your records before the ‘men in suits’ come knocking. It is by having these professionals inspect your records that you can avoid a possible fine in the future. Although there may be no restrictions as to how these audits should be done, an annual audit would be enough for any company.
There are also certain standards that every business have to meet to remain in compliance with the industry standards and federal regulations. An internal audit may help you ensure you meet all these.
2. Improvement
Most entrepreneurs do not detect weaknesses in their businesses until they have been audited. An excellent example of this is if a business falls behind in production. While you may not notice it on time, a business audit will automatically detect this. Other inefficiencies that an audit can detect include the time taken for a customer order to be processed or shipped. The audit also outlines fixes that can be undertaken to ensure faster production as well as processing of customer orders. Instead of waiting for the government-funded inspections, it would be best if you had an internal audit conducted to detect any weaknesses and have them fixed in due time to improve business processes.
3. Fraud Detection
An internal audit is your best bet for detecting fraud within the business. The first type of fraud you are likely to detect is financial fraud, followed by bookkeeping mistakes. These are the most common discrepancies that if not detected early, can have a significant impact on the business processes. Finding these mistakes early in advance can also help avoid fraud as well.
Fraudulent financial reporting is a typical scenario in many businesses today, with many people losing thousands of dollars in fraud. Having a private firm do the audits is one of the best ways to detect such, and even fix everything before Uncle Sam comes knocking. This is one of the ways artificial intelligence can benefit those doing audits according to Barclay Simpson.
4. Loans
An internal audit has its benefits and especially when looking to apply for a business loan. Most lenders will want to look into your books to determine if the business is sound or not. Providing a most recent report of an internal audit could help you secure the loan easily. As long as the audit can prove the legitimacy and sound running of the business, any lender will be willing to offer to finance.
These are just but some of the reasons and advantages of performing an internal audit. While the first step may be the hardest, spending the extra shilling for an audit could save you lots of money and frustration in the long run.
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