5 Things You Need to Do Before an Internal Financial Audit
Financial internal audits can be intimidating to business owners and finance executives alike. However, both should understand that internal audits are not something to fret, especially when your company comes in prepared.
With the help of financial internal audits, you will be able to know if your business is reaching the idea profit levels, if compliance are handled appropriately, and if there are any fraudulent practices within your financial processes.
To better appreciate financial audits, here are some things you can add to your financial internal audit checklist to ensure a smooth and productive activity:
Prepare and organize your financial documents
From financial statements and reports, to bank records, financial process map, etc., everything that your auditor might need should be prepared beforehand.
It is desirable that your financial documents are organized properly to prevent mismanagement of files and ensure that the audit goes as efficient as possible. Coordinating with the internal auditors on how you should organize your documents will not hurt as well.
PRO TIP: A ledger database technology exists wherein transactions or entries are synchronized across a network of users once they have been verified by the assigned users. This increases the transparency and security of the ledger, at the same time helps internal auditors to check on every transaction instead of random samples thru a software, giving them a more comprehensive and accurate picture of your financial transactions.
Create a calendar to accommodate the financial audit requests
On the course of the audit process, internal auditors may require you to sit down and discuss certain aspects of your financial process or transactions. Setting aside certain days within your work week or a couple of hours every day will be help them in this regard. Again, coordinating with your auditors on scheduling these discussions will contribute to a smooth audit process.
Review your compliance
Different business types have different compliance requirements. Before your internal audit commences, it is ideal that you have met these requirements to prove that you are legally operating your business, and that your processes are at par with the standards set by regulating bodies.
Provide clear definitions of the duties and responsibilities across your organization
While it may be challenging for small companies, it is expected that there are clear delineation of duties and responsibilities among the members of your organization, especially those who belong to the finance department.
Doing so will help you and the auditors pinpoint bottlenecks, prevent mistakes, and identify fraudulent undertakings in your transactions.
Conduct an internal assessment of your financial processes
Before the financial audit commences, it is helpful to conduct an honest assessment of your processes and transactions for the period that you are being audited for.
Are you keeping up with your internal controls and policies? What are the process bottlenecks that you need to address immediately? Is your accounting processes compatible with the Generally Accepted Accounting Principles? These are some talking points that you need to address in your internal assessment.
Once you’ve completed this activity, prepare a comprehensive summary of what has been discussed and hand it over to the auditors. This will help them make recommendations in addressing your issues and make the results of your audit more beneficial on your end.
Ticking these items off your financial audit checklist will help you achieve a worry-free and enjoyable financial audit experience. Remember that the audit process should result to the improvement of your finance processes, and not raise more problems about it.
If you are still confused on what you should do before an internal or external audit get in touch with our experts to get started!