Why Should I Get an External Audit?

Quality external auditors will take
the time you don't have to go
through your records with a fine-
tooth comb. Protect your company.

Question: What IS an external audit?

External audits are independent, unbiased reviews of your business’s financial records. You usually can contract an accounting or auditing firm to conduct this review. It can be an expensive exercise, but it has its benefits. While you may consider your organization’s controls and records to be flawless, an external third-party review can assure you if that is actually the case.

Three main advantages are outlined as follows:

1. Identification of Errors: As a business owner, even if you have the expertise to conduct your own audits, the responsibilities of running a business may prevent you from dedicating the time required to seek out errors and omissions in your financial records. An external audit will identify these mistakes and rectify them over the historical data. This, in turn, will provide you with clearer business records and data.
   
2. Internal Control Effectiveness: External auditors perform walk-throughs of each of your business processes and verify that approvals and authority checks are in place and working before a transaction lands in your financial records. They also determine that your computer systems perform correctly. This doesn't cover IT functions, but entails a check for controls in your systems to ensure that only authorized personnel perform certain tasks. The external auditor will advise you on how to address any issues they uncover.
   
3. Acceptance of Audited Statements: You may require a loan for your small business or a letter of credit to obtain merchandise. Banks and lending companies typically will require that you provide audited and reliable financial statements. Your company's net assets adjusted for goodwill can help you anticipate its current value, which can help you set a price for it, if you are willing to sell it. Similarly, tax authorities may be more willing to place reliance on your calculations for income or sales taxes if you present audited financial statements.

Audited financial statements indicate that you are a responsible business owner who practices transparency in your activities.

These acts of transparency contribute to the goodwill of your business. This can all be used easily to settle accounts, diffuse disputes among partners, and to prevent employees from committing fraud. 

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READ MORE>> yourbusiness.azcentral.com: "What Are the Advantages of An External Audit?

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