In virtually every case, a yearly audit of a company’s financial statements, including its income statement and balance sheet. Lenders generally need external audit reports as part of the loan covenants they impose on borrowers. For many organizations, an audit is needed by law because of the significant incentives to intentionally distort financial information in an attempt to commit fraud. A financial audit is an independent evaluation and assessment of an organization’s financial statements that is performed to guarantee that the organization’s financial records are accurate and fair. Most of the time, your stakeholders will prefer an audit conducted by a third party. However, an internal financial audit is also common. For this reason, a CPA firm may be the most appropriate choice for completing your audit. Finally, the purpose of a financial audit is to ensure that your company’s financial records correctly represent the company’s financial performance.
Although auditing your financial statements may make you feel like you’re in the limelight, the procedure’s goal is to guarantee that management has provided your stakeholders with a “true and fair” portrayal of the company’s financial situation. When you work in the finance department, auditing is a tedious and time-consuming responsibility. However, this does not have to be the case. Process improvement, professional development, and greater bottom-line profitability are all possible outcomes of a well-executed process improvement project.
Many firms consider audits to be a waste of time and money, which is a shame since they can be beneficial. Deloitte’s survey (Reference: https://deloitte.wsj.com/articles/high-impact-focus-may-boost-internal-audits-influence-1498449731) of more than 1,200 CAEs in 29 countries found that internal audit teams lacked the influence, skills, and tools essential to develop crucial forward-looking competencies that boards demand, such as the ability to foresee and respond to risk, according to the findings. Approximately one-quarter of CAEs (28%) believe that internal audit has little or no impact on the organization. This isn’t surprising when you consider that 55% of CAEs indicated they only had basic internal audit analytical abilities, such as spreadsheets, and just 11% claimed they had no analytical skills at all.
The use of a modern financial system, such as the NetSuite Finacial Management System, as well as rigorous planning and preparation, may allow the audit process to be greatly shortened. When auditors are able to quickly verify within a system that all of their inquiries have been addressed and that they are collecting correct data when they have an inquiry regarding a report or transaction, there is a great degree of confidence in them. If you present them with an Excel spreadsheet, they will see any potential issues and will request a larger sample size. You may be able to save both time and money by optimizing your processes. To prevent errors from growing, keep track of your data on a monthly or quarterly basis. Determine where you will save all of your receipts, including cancelled checks and gift cards so that you won’t have to spend time hunting for them during the year.
An expanding amount of organizations are coming to terms with the fact that they need a cutting-edge monetary system to function properly. According to Gartner, finance departments have been embracing cloud computing at a previously unthinkable place in recent years. According to the findings in a recent survey by Gartner (Reference: https://www.gartner.com/en/newsroom/press-releases/2021-08-02-gartner-says-four-trends-are-shaping-the-future-of-public-cloud), 36% of organizations would use the cloud to service more than half of their transactional records systems by 2020.
To keep pace with the increasing frequency and breadth of audits, financial systems that are up to date are becoming more important. The tax authorities are attempting to get more access to financial information on enterprises. Standard audit tax files (SAF-T), which are being introduced by governments throughout Europe, allow for the auditing of VAT returns for the first time. Governments gather information on sales and transactions, which they then use to perform audits before filing tax returns on behalf of businesses. Experts in the financial field recommend that you review your financial situation every year. While this may be difficult if your company is large, you should be able to comprehend your financial statements as a business owner. If they don’t, your auditors may have difficulties comprehending them, which may increase the amount of time it takes to conduct the investigation.
When a firm expands at a quick pace, the auditing process becomes more complicated. When businesses expand into new markets, they may be required to establish several different local accounting systems, each with its own set of internal controls, which auditors must document and audit to be compliant. It is possible that increasing the size of an organization by a third in two years will result in a threefold rise in the cost of auditing the organization. When a business expands, finance technology that can scale with the organization may be beneficial in preventing expenditures from increasing. In addition, with the aid of a cloud-based ERP system that can handle many subsidiaries, it is possible to build more offices quickly and effectively, eliminating the need for the firm to go to other locations to deal with local employees and local systems.
A cloud-based financial and ERP system like NetSuite ERP that is implemented across the whole organization will provide auditors with the insight and comfort they want, allowing audit fees to be kept to a minimum. In comparison to the expense and complexity of the audit process, the right practices and preparation have a bigger impact on the audit process. An audit is a vital component of the compliance process since it allows for the verification that the company’s financial records are correct and that there are no fraudulent activities taking place.
An audit must be precise and efficient to be considered relevant. With the assistance of a finance team and Chief Financial Officer, a company’s external stakeholders and investors may be more confident in the integrity and direction of the organization. A detailed understanding of the company’s finances indicates that the information can be used to analyze the company’s current performance and plan for the company’s future.
A custom NetSuite ERP solution can help your business in unimaginable ways, from making the finance department more efficient to leading your company to bigger profits. Partnering with NetSuite partners like Folio3 to customize, integrate, and implement NetSuite ERP into your operational model will pave your way to the top.