Is it time for an audit?
There are many reasons why a company may need an audit. These may vary from cash flow concerns and a general hunch that something is just not working out in the business, to a need to have a better grasp on the profitability of the business. You may also feel a need to simply run your business as well as possible with all tax and other legalities appropriately in place. Or perhaps you just want to be reassured that business plans are ‘on track’.
A business needs an audit like a car needs a service
Several years ago we conducted a brainstorming session to explore the reasons why companies need audits. Within the flowing ideas from the team we stumbled upon a gem – that an audit of a company can be paralleled to the regular servicing of a car.
Some car owners delay the necessary service of their cars for various reasons. The main reason may be lack of love and passion for the car, or perhaps just ‘not enough time’ to attend to its maintenance. In such instances of abandonment the car eventually develops minor problems which initially go unchecked, but then become more serious. This usually becomes a problem to the owner when they are driving in busy city traffic and suddenly a light shows on their dashboard or the car starts making unexpected noises. Sometimes this can be a sign of damage to the car that is irreversible.
A business is not that different. Businesses require regular checks by an independent person who is not involved in the everyday operations and who can be in a position to objectively view the business from a range of perspectives. Some of the common and easy to fix financial issues that might be overlooked by the business owners can easily be identified by an independent Advisor. There is no better independent advisor to identify such issues than an auditor.
Are audits necessary?
The simple answer is YES! Many business owners perceive an audit as being unnecessary. Some even see an audit as being like extracting a perfectly good tooth. Why?
It is a fear of auditors! Auditors were once seen primarily as interrogators rather than advisors. Their role, however, is now clearly more one of investigating. With the running of a business being a complex task – their roles are essential. While auditor’s need to remain independent as prescribed by the Auditing and Ethical Standards, they may be able to provide insightful advice on process improvement, advice which can improve processes which may be cumbersome, old-fashioned, risky, ineffective or unnecessary.
Advice In a statutory external audit, auditors may be able to provide advice in numerous areas including:
- Recognition of potential risks of misappropriation of funds due to weak internal controls.
- Business succession and risks associated with inadequate plans being in place.
- Cashflow management.
- Assessment of debt collection and debtor days.
- Identification of excessive interest rates on debts and assistance with refinancing and inadequate interest rates earned on deposits.
- Short creditor payment cycles which cause cashflow constraints.
In addition to the above, the presence of auditors on a business premise leads to greater awareness within finance staff, thus potentially leading to greater accountability and a more efficient work environment.
At Accru Melbourne we strongly believe that our role as auditors exceeds beyond ticking boxes and assisting in compliance. We help our clients achieve the most desirable outcomes for their businesses. For more information, please contact one of our Business Advisory or Audit Specialists today.