The audit, which is often a time-consuming and undesirable chore for the financial department, does not have to be thus. If done correctly, it provides a potential for process improvement, career growth, and bottom-line strengthening.
Try out this activity. Challenge one financial group to find the bookkeeping errors. Make a challenge to someone else to make reports and tag the data. Many of the auditors’ queries have already been answered when they arrive. Furthermore, it provides an instructional moment for staff in terms of reporting and learning about weaknesses in the system and the audit process itself.
Unfortunately, for many, auditing has become a tick-box exercise that brings little value to the organisation.
As a matter of fact, a Deloitte survey of over 1,200 chief audit executives (CAEs) from 29 countries discovered that internal audit teams lack the influence, skills, and tools required to create crucial forward-looking capabilities that boards anticipate, such as anticipating and responding to risk. Fewer than a third (28%) of CAEs believe internal audit has a significant impact and influence on the organisation. That’s hardly unexpected given that slightly over half (55 percent) of CAEs reported having very rudimentary internal audit analytical capabilities, such as spreadsheets, and 11% reported having no analytics at all.
The finance structure makes it difficult for many of these organisations to deal with audits. Finance organisations with a tangle of fragmented systems spend a large amount of time reconciling data. However, modern cloud-based solutions can provide a unified view of data in real-time. It is now possible to automate much of the audit process in order to flag errors and filter information effectively.
Thorough planning and preparation, combined with a contemporary financial system, can significantly speed up the audit process. If an auditor has a question, the finance team can quickly show them within the system that all of the data is live, the report they’re looking for, the criteria, the subsidiary, and the specific transactions giving auditors confidence in the controls and the fact that they’re getting the right data. If you provide them with an Excel spreadsheet, they’ll notice possible problems and request a larger sample.
Many organisations are beginning to recognise the significance of a contemporary finance system. Finance departments are embracing the cloud at a considerably faster rate than projected, according to analyst firm Gartner. According to Gartner’s poll of senior finance executives, by 2020, 36% of organisations will be using the cloud to support more than half of their transactional systems of record.
The frequency of audits is going towards real-time,’ while the scope is expanding, which adds to the demand for more sophisticated finance systems. Tax administrations are seeking broader access to financial details held by businesses. Governments across Europe are implementing standard audit tax files (SAF-T), which will allow VAT submissions to be audited. Governments are moving toward a model in which they receive sales and purchase data, audit it, and then file returns on behalf of firms.
The audit process is made more difficult by fast-growing businesses. Organisations entering new international markets can deploy numerous local accounting systems, each with its own set of internal controls that auditors must document and audit. When an organisation’s size triples in two years, the cost of the audit usually triples as well. Finance technology that scales with the firm can save costs from rising in lockstep with the company’s growth. Furthermore, with a global cloud ERP system that can handle multiple subsidiaries, the company can quickly and easily launch new offices and subsidiaries, with financial data instantaneously loading up to headquarters where staff can work directly with auditors, reducing the need for employees to travel to other locations to deal with local staff and local systems.
A universal cloud-based finance and ERP system that spans the entire organisation will offer auditors the necessary insight and reassurance while keeping audit costs minimum.
The correct systems and preparation influence more than only the cost and complexity of the audit process. An auditor’s primary compliance function is to assure the correctness of financial records and the absence of fraudulent activities and to meet legal duties to submit accurate corporate records and pay the necessary tax.
If the compliance process is accurate and efficient, the audit becomes more than a pointless tick-box exercise. By bringing together accurate and real-time information, the finance team and CFO can assist business growth while also providing external stakeholders and investors with confidence in the business’s integrity and direction.
Lastly, having a firm grasp of the finances implies that information can be used to more correctly assess its current performance and better prepare for its future.