How Auditing Helps Business to Grow?

As a business owner, you juggle dozens of responsibilities. Sometimes, it feels like hundreds. Finding available resources—money and time—for a new expense is difficult.

However, every growing business must seriously consider investing the time and money required for an annual audit of the company financial statements. An audit performed by specialized firm can help you work more efficiently, protect your company from employee theft, and will increase the accuracy of your accounting records.

Business Process Audit Definition

A business process audit is a formal and technical way to derive and assess whether the company is managing its business processes, taking into account:

• The strategic objectives of the organization.
• The specific goals.
• Suitable procedures.

Also, one must make sure that:

• The performance of processes is within the desired standards.
• Controls are suitable for the correct measurement of processes.
• The procedures are suitable to achieve the desired levels of efficiency and effectiveness.

As it turns out, a business process audit is a warning that the administration should take action if necessary and at the same time, a guarantee that the work is being done right, when the auditors verify it.

The audit process has become a necessary element for most large corporations to remain competitive with the competition, ensuring the delivery of expected value to customers and business sustainability.

Business Process Audit Objectives

The objectives are many and varied, but we can highlight some of them:

• The elimination of anomalies.
• To be following the goals and objectives set by senior management.
• The encouraging continuous improvement.
• Risk Control.
• The definition of contingency plans.
• Suggestions for improvements.
• Solidifying the “process culture” in the company.
• Best management practices.
• More data for decision-making by leaders.
• Enables the proper training of employees.
• IT resources assessment being used.
• Safer and more reliable information.
• Increased productivity.
• Adequacy of physical and structural resources for the tasks.
• More transparency.

To achieve these and other objectives, the business process auditor (or your team) can make use of various practices. Initially, it is customary to perform an alignment meeting with management and other important stakeholders involved, followed by interviews with key employees.

After that, check-lists and questionnaires are designed so that you can gather the required data, sometimes, even more, interviews, and direct observation of processes and evidence collection.

With all this information available and organized into data, you need to make reports of the business process audit to be presented to company managers, along with an action plan for regularization of any necessary changes and improvements.

Subsequently, work should be done to track how the improvement actions (as a result of the business process audit) are being implemented

Importance of Business Audits

A company must ensure that its resources are used efficiently to ensure its own financial health. It is also about meeting commitments made to clients, suppliers, creditors and, if any, employees. Companies are supposed to comply with the legal rules, in particular in the field of labor law and payment of different taxes. The mission of the auditor is to provide a professional diagnosis on the financial status of the company. This report will then serve as a confidence notice for future creditors or investors of the company.

Some of the Major benefits of Business Audits are discussed below

1. Get a second opinion

An audit is an opportunity for a CPA firm to give you a second opinion on the accuracy of your financial statements. Auditors conduct work by reviewing assertions, and if there is evidence to support a particular assertion.

The existence assertion, for example, addresses whether or not the assets listed on the balance sheet actually exist. A company may be tempted to inflate the dollar amount of assets in the balance sheet, to make the business appear more valuable. Auditors use the existence assertion to address this risk.

As an fictional example, let’s say Julie Myers owns and operates Premier Homes, a home construction business. Her firm generated $1 million in sales last year, and the company is growing rapidly. Witnessing that growth, Premier’s tax accountant, Bob, recommends an annual business audit.

Premier Homes owns $150,000 in fixed assets, including machinery, equipment, and vehicles used for home construction. To prove the existence assertion, the auditor will physically inspect each of these fixed assets. Once an auditor gathers evidence to support each type of assertion, Julie will have third-party validation that her financial statements are materially correct.

2. Assess business efficiency

Rapid growth may cause an owner to lose control of operations, and business efficiency can decline. An audit reveals areas of company inefficiency and helps the owner to make improvements.

Auditors assess the income statement by reviewing changes in the expense and revenue balances over a period of years. Assume, for example, that labor costs have increased at a much faster rate than sales over the last three years.

Julie can use the income statement analysis and investigate the reason for the cost increase. She may find that new employees are not working efficiently and spending too much time on certain tasks. Julie then decides to increase her training efforts for new hires, so that she can reduce Premier’s total labor hours.

3. Reduce the risk of employee theft

The biggest risk for a rapidly growing company is employee theft, and an audit can help you identify areas of risk.

To manage growth, Julie has doubled the size of her staff in the last year, and she has quickly delegated work to keep up with the demands of the business. Without proper training and supervision, Julie may expose Premier to the risk of employee theft, particularly the theft of cash.

Every audit requires a careful review of the cash balance, including a recalculation of each month’s bank reconciliation for the past year. When the auditors arrive in February, Julie explains that she has not reconciled her bank account for December- the last month of her fiscal year.

Julie works with an auditor on the December bank reconciliation and finds a check payable to “cash”—and signed by Julie—for $12,000. After further investigation, the auditors determine that the administrative assistant had Julie sign the check and that the assistant cashed the check and kept the funds.

Based on this evidence, Julie contacts her attorney and terminates the employee before any further theft occurs.

4. Make the change

The demands of running your business can seem overwhelming, and it may be difficult to decide which tasks are most important.

Hiring a CPA firm to conduct an annual audit is a critically important step to take, in order to manage growth and make informed business decisions. Sure, an audit will require an investment of time and money, but the benefits of an audit far outweigh the costs.

Make this important change and hire a CPA firm to conduct an annual audit.