While business audits can feel overwhelming from a data-gathering standpoint, they are a necessary component of business operations. But instead of dreading audits, businesses owners should welcome them, as no other process is better at evaluating the financial status of your business. As business owners, it's essential to understand the auditing process, the difference between internal and external auditors, and understand how to prepare your organization for this regular occurrence. While there are many tools to get your company audit-ready, implementing accounting software and inventory management tools are two of the most effective steps.
The Auditing Process
Companies undergo audits for a variety of reasons. During an examination, the financial statements of a company are reviewed to determine the accuracy of the representations they claim to present. All businesses are audited at least once a year, but larger organizations undergo audits much more often. Depending on the type of business and kind of audit conducted, it will either be completed by an internal or external auditor.
Internal auditors are hired by company management to perform audits. Internal auditors can be internal employees or appointed auditors, and although it's not always the case, most auditors are CPAs. Based on their findings, an internal auditor will develop a report for management, as well as suggestions for financial improvements and risk mitigation strategies.
Auditors may also come from an external source, such as being appointed through a shareholder vote or appointed by the government, in the case of an IRS audit. External auditors are registered CPAs that review the financial statements of a company and offer opinions of the organization's financial accuracy and strength. As independent parties, the recommendation of external auditors is highly valued by creditors, as well as the investment community.
How to Streamline The Audit Process:
For the auditing process to run smoothly, a business must have tight controls on business operations, accurate financials and a handle on their physical inventory. Luckily, today there are many useful options for cloud accounting software and inventory management tools, all of which can keep a company in shape to benefit from the audit process.
Accounting software has become an essential component of any modern business, and a necessary element of audit preparation. Accounting software offers many benefits to organizations, the most relevant of which are listed below.
While smaller companies may operate with manual accounting methods, as a company grows, it becomes imperative to introduce more robust systems to manage financials.
However, for large companies, cloud-based accounting software is the ideal solution. In addition to the benefits listed above, cloud accounting software allows immediate access, input and report generation anywhere in the world.
Through the adoption of accounting software, your company financials will be organized and accurate, which is the key to a smooth company audit.
Inventory Management Tools
Inventory management software is another tool to help growing organizations realize efficiencies. Like accounting software, a well-designed inventory management system will also aid in preparing your company for business audits.
Growing organizations are often tasked with managing inventory data across multiple systems, some for listing products and others for processing orders. Inputting this data is not only complicated but also timely.
With an inventory management system, your organization will be ready for audits with a firm grasp of inventory flow, and access to the benefits listed below.
Instead of being wary of the auditing process, set your business up with internal systems that make the process easy and effective. Accounting software and inventory management tools are vital elements to regular auditing, allowing increased accountability and transparency in the areas that matter most.