Preparing for an audit – what do we need to know?

Dec 22, 2023 | Business

With the right mindset and a bit of guidance, preparing your business for an audit can be less of a headache and more of an opportunity to showcase your financial acumen.

In today’s blog post, we’re diving into the thrilling world of audits to give you the foundation you need to plan or manage your own.

Understand the audit’s purpose

First things first, let’s demystify what an audit actually is.

An audit is not a corporate version of a treasure hunt where auditors are looking for hidden mistakes; it’s an independent evaluation of your financial statements to ensure they represent a fair and accurate view of your company’s financial position. Think of it as a financial health check-up.

Some companies have to undergo statutory audits once they meet certain criteria, but you can also choose to have one if you want to.


Gather your financial statements

Now, to the meat of the matter: preparation.

Start by rounding up all your financial statements. This includes your business’s balance sheet, income statement, cashflow statement and any other relevant paperwork like bank statements and receipts.

Make sure these are as neat and tidy as possible. Auditors appreciate organisation — it makes their job easier and your life less stressful.


Review your internal controls

Auditors will have a keen eye on your internal controls. These are your company’s policies and procedures that ensure accuracy and prevent fraud.


Inventory and asset verification

If your business holds inventory or significant assets, auditors will want to check these. It’s time for some business housekeeping.

Ensure your inventory records are up to date and that physical counts match your records. It’s like pairing socks — sometimes tedious but oh-so-satisfying when it all adds up.


Ensure compliance with laws and regulations

One of the main roles of auditors is checking whether your business complies with relevant laws and regulations.

This is not just about dotting the i’s and crossing the t’s; it’s about making sure your business practices are above board and ethical.


Be ready for questions

Expect a lot of questions. Auditors are trained to be inquisitive.

They’ll want to understand the story behind the numbers. Keep your answers clear, concise, and, most importantly, truthful. Honesty is the best policy, after all.


Plan for the audit’s timing

Coordinate with your auditor to schedule the audit at a time that minimises disruption to your business.

For statutory audits, you’ll need to conduct them within 9 months after the end of the business’s financial year.

It’s a bit like scheduling a dental appointment — you know it’s necessary, but you’d rather it not clash with your holiday/business plans.


Keep communication open

Maintain open lines of communication with your auditors. If they understand your business better, they can tailor their audit approach accordingly.


Review past audits

If this isn’t your first rodeo, look at previous audit reports; they’re a goldmine of information on what went well and what didn’t. Learn from the past to perfect the present.


Stay calm

Finally, remember to stay calm. Audits may seem daunting, but they’re a normal part of the business lifecycle. Approach your audit with confidence and see it as a chance to improve your business practices.

An audit doesn’t have to be a dreaded event, and with proper preparation, clear communication and a positive attitude, it can be a smooth and even enlightening process.

So, let’s embrace it with the enthusiasm of an accountant at the start of a new fiscal year. Happy auditing!

To talk about auditing your business, get in touch with us today.

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