How to Properly Conduct an Internal Financial Audit
Doing a financial audit means looking into the financial net worth of your company. This practice primarily involves checking business accounting records, internal control policies and other major business financial concerns.
While you are not obliged to conduct a financial audit internally, this is an important procedure in preparing your business for an upcoming external audit. If you’re not sure how to start a financial audit, here are some practical steps to get you started:
1. Improve Financial Documentation
Looking through your company's financial records requires a scrutiny of your financial documents. Examine the records you have at hand and make sure that all pertinent information is being monitored. At this point, it is not enough that your financial data is accurate; it should also be complete.
2. Check Internal Policies
Once you have gone through your financial records, you will likely discover discrepancies or data entry errors or records that have not been updated yet. Go back to the internal policies and make corrections based on the existing measures. This will ensure the accuracy and completeness of your business financial data.
3. Review Accounting System
The next step requires an in-depth review of the accounting program you are currently using. Make sure you understand how specific features work so that you can maximize the use of your cloud accounting software.
4. Compare financial records
Go back to the financial records you have obtained from your accounting system. Compare these with your records in the bank versus the financial information indicated in your ledgers.
5. Discuss your initial assessment
Discuss the outcomes of your internal financial audit with the members of your accounting staff. Try to agree on a new set of standards and policies to help improve your internal accounting processes. This will help you be on your guard when the Canadian Revenue Agency conducts an audit for your business.
Consider Outsourcing your Internal Audit Function
Internal audit guarantees more control and additional value for your organization. However, if you don’t have a team inside your firm to do the practice, why not consider outsourcing the function?
Outsourced Internal Audit is Flexible
You can hire consultant auditors to take over your audit function when you can’t form a full-time group to handle the practice. You can use their services without having them aboard all the time.
Scale with Your Growing Team
Outsourcing your audit function means meeting the needs of the organization and scale as your firm grows over time. This external resource also adds value to your group by bringing industry expertise.
Providing Fresh Perspectives
When you outsource a particular business function, you are given the opportunity to gain expertise and familiarity from a third-party with vast experiences from different verticals.
Doing a financial audit gets you one step ahead for the inevitable business audit check. Get it done now to avoid problems with the CRA in the long run.
This post was first published 21 September 2015 and edited 22 June 2020.