Although audits are generally considered stressful events, a lot of valuable information can be gained from these financial exercises. Internal and external audits are performed for a variety of reasons. Both can help pinpoint areas where a small business is lacking in internal controls, operational efficiency or regulatory compliance.
Small businesses can gain a lot from having a better understanding of their financial position. Benefits of regular audits include improved interest rates, increased protection from risk and legal liabilities and access to more capital. A financial review or audit can also give a business owner a better understanding of how their business operates, uses cash and assumes risk.
What is an audit?
An audit is an independent examination of a company’s financial statements. Audits provide assurance to financial stakeholders that the company’s financial statements are free from material errors. Certain types of audits also provide assurance that a company’s policies and procedures are being carried out as intended. Information obtained during an audit can be used to help strengthen and grow the business.
Types of small business audits include:
- Financial Statement Audit
Provides reasonable assurance about the business’ financial information. This involves detail testing of accounts and records, walkthroughs of accounting processes and analytical testing. This type of audit ensures that the business is compliant with all governing body requirements.
- Attestation Engagements
Provides verification of a business’ financial or other data.
- Financial Statement Review
Provides limited assurance that the business is running as it should and helps to locate areas that need improvement. These can be useful to any department or process within a business and may be required for some lenders and bonding agents.
Why Small Businesses Conduct Audits
Due to industry regulations, some small businesses are required to undergo internal and external audits. Sometimes a small business may need to produce a positive audit opinion in order to secure a small business loan. Other reasons for audits include suspected fraud, employee theft, and operating inefficiencies.
A clean audit opinion from a qualified external auditor can help small businesses gain the confidence of investors, customers and business partners.
McKenzie Forensic Group, Inc., provides professional auditing services for a variety of industries. Our comprehensive financial reporting services provide a clear image of your company’s performance and potential. We perform audits for not-for-profit, construction industry entities, governmental sectors and funding.
