Oh no, Audits…That boring talk again, Do I need to read this? Do I need audit service? All right, I can feel your thoughts before you read further.
For different types of audit, check out our blog, “what is audit”. In this blog post, we will be talking about internal audit.
The internal audit takes place within the business. Usually, an internal audit conducted by the in-house audit team.
Some common reasons to conduct an Internal Audit are as below,
- To check the effectiveness of internal control environment
- To ensure your business is compliant with regulations
- To review financial information
- To examine operation processes
- To evaluate the effectiveness of risk management policies & procedures
Depending upon the circumstances and business schedule, an internal audit can be conducted daily, weekly, monthly, or annually.
So, let me break this down in simple words. An audit of the business is the same as a health check.
I mean, you might go to the Hospital and get your sugar checked, your eyes tested and some general blood test. This ensures that you are fit and healthy.
Why is your business any different?
Audit services check your business’s health and find out if your business is healthy under the surface or not?
Let me walk you through the meaning of an audit and five reasons why you should keep the finger on the pulse of your business in London with the help of auditors.
This blog post is divided into the following sections
- What is an audit & why it’s important?
- Businesses that do & do not need auditing service
- Reasons why you need an audit service for your business
- Final thought
What is an audit & why it’s important?
Generally, audits are the maintenance checks of a business.
Numbers speak – Numbers tell a business’s story. In order to understand it, you will need to read between ones and zeroes in a line.
Internal audits examine those numbers and help you find out and spot errors within your business – simply, audits draw out errors in your numbers. It also focuses on non-financial data, such as segregation of duties, compliance with the risk management parameters, payments are made with appropriate approvals, etc.
Essentially, Audits are conducted to check the accuracy. As a result, it helps find mistakes in your business’s accounting and bookkeeping system.
With the help of audits, you can spot small mistakes before they turn into big ones. You can find minor control weaknesses before they take the business down.
Many businesses find internal auditing so much intimidating as it involves a very tedious and long process; few businesses even completely ignore audits and gain nothing but more issues at the end.
Though well managed and sorted, business information can make the audit procedure easy for your business.
Auditing services are provided by expert auditors, who file and examine your business’s financial information and then conduct a deep analysis; the auditor ensures the accuracy of your business’s financial information and records.
Visit our blog post about what is an audit, to know audit & types of audit in detail.
Businesses that do & do not need auditing service
Well, the good news is that most companies do not legally require having an internal audit function. Only public companies and large organisations are required to have one under Corporate Governance rules.
However, many medium-sized businesses still maintain an effective internal audit function.
Reasons why you need an audit service for your business
1. Reduce risks & detects frauds
No matter how well you know the sector of your business, you cannot always anticipate the potential risks related to it.
An audit can help you spot potential risks and draw a plan to reduce them for a better future for your business.
As mentioned above, auditing examines internal controls and records of your business. An effective internal audit function will check:
- Existing controls are sufficient
- What improvements can be made
- Are existing controls being followed and practised
- Highlight any departures and deviations
- Rank these deviations- critical or non-critical
- Report to the senior management- usually audit committee
In case there has been a mistake or an error, even the smallest error, it will be sought out.
Audit procedures are maintenance checks for the business. It helps you detect errors in numbers, calculations, business records or internal controls.
In addition, any frauds can also be identified by having an effective internal audit function. It is a preventive control. Thus, with an audit, you can make sure credibility to your business in London.
2. Gives assurance to your investors
You may consider running an audit to provide assurance to investors and shareholders. As both like to invest in a business that is not only well run but well maintained.
If you have family-owned businesses, then shareholders are not necessarily involved in the day-to-day running of the business.
An audit report will help you provide assurance to the shareholders that the business is recording transactions as it should.
Also, it is crucial for businesses to be transparent with the auditor as they are not there to judge individuals’ performance but rather to support and guide your business while maintaining their independent perspective.
For instance, audited business data can be brought ahead in the case of alteration of capital and valuation of goodwill on the retirement and the passing of the partner.
3. Support business growth & foster decision making
Businesses must move forward, and if they don’t, they won’t be here tomorrow.
Even the businesses that choose to downsize still have to stay ahead of the competitors and keep up with the latest technology. An internal audit can help you discover areas that require refocusing.
To ensure the health and wellbeing of your business, effective auditing is critical.
Based on their finding and discoveries in records, auditors can give a solid recommendation with respect to the enhancement of your business.
By choosing audit services, you can recognise key areas for development in your business.
And, if your business is connected with innovations and the latest technology, then you should also read our blog post, an essential guide to R&D tax credits.
4. Applies expert knowledge
Audit services provide various expert procedures and bring in a highly competent team with updated methods and software. You can have this function in house or outsource.
Auditors have a solid point of view of a business which they apply to carry out valuable examinations and significant information.
The management in your business can use those data to assess the organisation and actualise measures that are important to meet business goals.
The auditors will give you a clear reflection on whether your business is compliant and if there are any serious flaws in your system.
Not just that, but they will also provide helpful suggestions on how to solve the errors.
If you carry out the audit in the early stage of your business, it could mean the difference between your company thriving and struggling in the near future.
5. You will have a detailed overview & ensure compliance
You will have the final audit report in your hands once the auditors have concluded their findings.
From now on, you will have a perfect picture of how your business is doing.
Although you have spent much of your time making sure that your business has clean records and keeping up with every rule possible, there are bound to be tiny mistakes you should correct.
In addition, the audit report will show you the areas where your business is most stable.
Good managers must know where to spend their precious time, and the very first step of understanding that is to know where you do not need to focus anymore.
By performing an internal audit regularly, you can make sure compliance with all relevant laws and regulations.
Audits can also provide you with peace of mind that your business is prepared for your next external audit.
Auditing is an important and worthwhile activity for your organisation in order to gain client trust and avoiding costly fines associated with non-compliance.
An effective internal audit function assists management in overseeing the business and ensuring compliance with internal policies and procedures. You can identify problems at an early stage and take corrective action before it is too late.