Why audit doesn’t have to be a dirty word for your business
Seeing beyond the obligation to deep opportunities
Knowledge is power and audits can uncover pivotal insights to put your business on a path to success. Discover how your next audit can mitigate risk and accelerate long-term growth.
When and why you might need a business audit
Audit – it’s a little word that can strike big fear into the most seasoned of business owners. But with the right support, audits can actually provide your business with a variety of powerful benefits.
At a foundational level, audits help to ensure your financial records are accurate, up to date and compliant with important regulations – safeguarding you against costly penalties. But more than just an assessment of what is, they also have the power to shape what could be – by uncovering areas for improvement that have the potential to save you money, optimise processes and drive long-term growth.
While any time is a good time to check in with your business, here are some scenarios that might bring an audit to the top of your to-do list:
- Finding investors or applying for a grant: An external audit can boost the credibility of your investment proposal, helping to convince potential investors your business is a sure financial bet. When applying for a government grant, an external audit is likely to be a requirement – ensuring your accounting figures are accurate and impartial.
- Securing a loan to expand your business: When looking to obtain a loan, many lenders will require an external audit to confirm the figures in your financial statements.
- Selling your business: Potential purchasers are also likely to require an external audit of your financial statements, assuring them your business is consistently profitable.
- Going public: If you aspire to go public with your business, you’ll need three years of externally audited financial statements before doing so.
- Ensuring compliance: As a business owner, it’s hard to stay across ever-evolving government and tax regulations. An external audit provides peace of mind that you’re compliant with regulations, identifying any gaps before they become costly problems.
- Detecting fraud: Audits can detect fraudulent activity or discrepancies in your financial records, which is especially important if your business handles sensitive data or processes a high volume of transactions.
What’s the difference between an audit and a review?Some small-to-medium-sized businesses have the option of having their financial statements reviewed instead of audited. So, what’s the difference?
Very simply, a review is faster and cheaper than an audit. But it’s also less comprehensive and therefore provides a lower level of assurance. When you consider the risks that come with a lack of in-depth visibility, an external audit is likely money and time well spent.
What an audit covers
The scope of an audit will vary depending on its particular objectives, but may include:
- examining financial statements and other data
- analysing business operations, processes and performance
- evaluating company assets to ensure accurate valuation
- determining tax obligations
- ensuring compliance with government and industry regulations.
Typically, an audit will involve three key phases:
- Planning: Auditors will plan the nature, timing and duration of audit procedures, and learn about the business and industry it operates in. Key documentation is gathered during this phase, and an audit strategy will be provided outlining audit criteria, milestones and responsibilities.
- Execution: Auditors focus on gathering evidence to address the audit objectives, and form and support the audit conclusion.
- Conclusion: Auditors document the final findings and recommendations of the audit in a thorough report. The business’s action on the recommendations provided become a key reference point for follow up audits.
What to look for when getting support
Once you’ve decided to invest in an audit, you want to ensure you put it in capable hands. There are four types of registered auditors to consider:
- Registered company auditors and authorised audit companies: Public practitioners must be registered as a Registered Company Auditor (RCA) with ASIC to be appointed as an auditor.
- Registered auditors with the Registered Organisation Commission: Auditors must complete separate registration to audit Unions and Employer Associations under the Fair Work (Registered Organisations) Act 2009.
- Registered self-managed super fund (SMSF) auditors: SMSF auditors have separate registration requirements and must meet ASIC Regulatory Guide RG 243 (Registration of self-managed superannuation fund auditors) to audit SMSFs under the Superannuation Industry (Supervision) Act 1993.
- External examiners for legal practitioner trust accounts: CPA Australia members with a current Public Practice Certificate who have successfully completed the relevant course as approved by the Legal Services Council can act as external examiners for law practice trust accounts.
In addition to selecting the right type of auditor, make sure you choose a provider who will deliver audit services tailored to your business, operations, risk and growth objectives. This is the difference between an audit that gives you a basic picture of what is versus an audit that goes the extra mile to help you make informed decisions for your business’s future.
Auditing for long-term business growth
Savvy businesses are increasingly viewing auditing as an opportunity rather than an obligation. When it comes to delivering long-term business growth, how can an audit add value and put you on a path to success?
- Informed decision-making: With an accurate picture in place, more strategic decisions can be made around where to focus next.
- Mitigate risk: Auditors analyse cash flows, competitors and market risk to help you stay one step ahead and mitigate risks that pose a threat to the future of your business.
- Accelerate growth: Optimise your processes, reduce costs, increase profitability and attract interest from external stakeholders and investors to gain a competitive edge and kickstart growth.
Embrace the opportunity in your next business audit
All it takes is a little perspective shift to see your next audit in a new light. Approach it with an open mind and it could uncover a raft of opportunities and benefits for your business. If in doubt about how to get the most value from your audit, it pays to get expert advice from a business audit accountant with proven auditing experience.