Does Your Business Need Financial Audit?
When we are talking about a financial audit, we are referring to an audit of accounting records. Or an audit of accounting transactions for a company for a specific period of time and based on Generally Accepted Accounting Principles or GAAP.
Does your business need a financial audit? The answer is it depends on the size of the company, the type of the company and the ultimate goals and objectives of the company. An example of a company that does not need an audit is a micro company with $2 million revenue with five employees and is closely held. It has no plans of selling and is not growing exponentially and has not debt. For such a situation, there is no need to get an audit done. Save the money for something else and move on.
However, if your company is a growing $2 million organisation that is backed by investors and has plans on having or have some debt, a financial audit is necessary. The audit needs to be completed if one day you want to go public.
For companies that have a revenue of $15 million to $200 million, and is a closely held business with some debt; and may or may not sell at some point, have 20 to 200 employees and want to continue growing, it is always recommended that their financial records should be audited by competent CPAs.
Recommendations to completing an audit.
Why is it recommended that this kind of business should complete an audit? Audits are not designed to eliminate risk, catch all errors or offer guarantees. However, audits provide peace of mind that accounting records properly represent the financial condition of the company according to or based on GAAP.
Why is this important? This is important because they give financial records quality that can be used as tools to properly run the business. Audit add value to a company once they are completed. Users of audited financial statements will have a positive sense of quality as it relates to the numbers presented in them.
Does your business need a financial audit? If you want to increase the value of your company, then an audit is definitely necessary. Audits will help you identify areas that should be improved.
Benefits of a Financial audit
- Audits enhance the quality of financial statements.
- Third-party users of these audited financial statements like private equity groups, investors, banks, valuation specialists, insurance companies will see your company as one that cares about quality and a better company because you have audited financial statements.
- Third parties like investors and banks may require financial statement audits.
- You will be required to have your financial statements audited if you plan on going through an IPO.
- Financial audits add value to your company.
- If you are planning to exit, prospective buyers of your company will look at your company as better than other companies that do not have audited financial statements.
- Audits offer peace of mind to owners or CEOs. Audits do not guarantee that there is no fraud and that there are no cash leaks. However, there is a good chance that if there are any wrongdoings, or fraud going on, a complete audit might pick these things up.
- Audits look into internal controls and auditors give suggestions on how to improve them.
Complete a Financial audit Annually.
The numbers in the accounting records are still management’s responsibility but audit gives a layer of excellence. Audits are not a one-time event. They should be done annually. They should also be part of the best business practices which will distinguish your company from others, add value to it and make your company a better company in various ways.
The cost of a financial audit. The cost of a financial audit depends on several things. Some of the things that influence the cost of a financial audit include:
- The size of the businessThe complexity of the business
- The number of transactions each year
- The number of legal entities
- If it is a local or international company
- If it is a public or private company
- If there no inventory or a lot of inventory in several locations
- If it is in various locations or a single site
- If it is a manufacturing or service company
Who should you use to complete the audit?
There are many great regional and local firms that can complete the audit for a much lower cost. However, be careful. Use firms that provide audit services that have multiple skill sets or resources to complete the audit. Choose your auditors wisely.
Increase the value of your business through a financial audit.
With the proper guidance from a qualified advisor, you will get value for your audit and it does not matter how much you paid for it. A well-run audit of financial statements by a good firm will pay for itself several times over, give value to your business and give you peace of mind.
Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit, and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.