What is a Business Audit and Why Do I Need One?

As a business owner, you’re trying to juggle dozens of tasks at any given moment. So, finding the time, money, and available resources for a new expense is challenging.

However, every growing business could use a second set of eyes to review financial statements to ensure the company is operating as efficiently as possible. That’s why an annual audit could be a game-changer for your business.

Many business owners may think of the IRS and an enormous hassle when they hear “audit.” But instead of reviewing your tax documents in search of discrepancies, a business audit performed by a qualified CPA firm can give you insight into how you can work more efficiently, protect your company from employee theft, alert you to potential problems, and increase the accuracy of your accounting records.

What is a small business audit?

A business audit is a documented evaluation of a company’s financial statements to ensure they are accurate and comply with relevant laws and regulations specific to that business. Many large corporations conduct internal audits, while smaller businesses will often hire an accounting or auditing firm to conduct their audits.

Financial statements

Audits are designed to find errors in financial statements. An auditor reports whether the financial statements are free of errors or missing information that is large enough to impact the reader’s opinion of the statements and the business as a whole.

Regulatory requirements

A business’s financial statements must adhere to a set of accounting rules depending on what type of business it is. For for-profit businesses, most follow the Generally Accepted Accounting Principles (GAAP), while governmental and not-for-profit firms use different sets of accounting rules.

Internal controls

Internal controls are put in place so that the business can produce accurate financial statements and prevent assets from theft. An audit can assess the effectiveness of these controls and identify possible weaknesses.

How does a small business audit work?

In most situations, an auditor will either be provided with a year’s worth of physical financial statements or be provided with account information to view documents digitally. When the audit is finished, you will be provided with an audit report that will detail the scope of the audit and whether the auditor found the company’s financial records to be accurate. Audit reports are structured to comply with Generally Accepted Accounting Principles.

Differences between types of audits

Aside from IRS audits, there are two types of business audits: internal and external.

Many large corporations have departments dedicated to auditing operations happening within the business. These are company employees and not independent.

Conversely, external audits come from CPA firms and must be independent of the business under audit. That means the only compensation the firm may receive is the fee for the audit. The CPA firm is not permitted to perform tax, consulting, or any other work for the client undergoing the audit.

How can a business audit benefit your company?

In the same way you visit your doctor for an annual physical exam, annual audits can identify potential problems before they become major issues for your business. Knowing an audit is coming can also encourage your employees to be even more meticulous in their work and financial reporting.

Audits can also discourage employee theft, which is sadly a real risk for many growing businesses. Audits can shine a light on overlooked areas where theft can occur more easily.

Assess business efficiency with an audit

When a business grows rapidly, it’s easy to lose track of some details within day-to-day operations. That means lost efficiency and ultimately lost revenue. A business audit, however, can highlight areas of company inefficiency and allows the business owner to make necessary improvements.

For example, by assessing financial statements for several years, auditors can find areas where materials or labor costs have increased at a much faster rate than sales. The business owner can then make the necessary adjustments with concrete information to confidently make decisions in the best interest of the business.

Compilation services

It’s tough for any small business owner to keep their financial documents organized, so outside assistance may be exactly what you need to maintain efficiency. A compilation engagement involves gaining a general understanding of your business, financial reporting system, and accounting fundamentals used. This information is then presented through methods needed for your specific needs.

Simply put, compilation services convert your company’s data into financial statements. Along with a company audit, you now have a clear and accurate picture of your business’s financial standing.

An auditing firm responsive to your needs

It may seem overwhelming to try to tackle all the demands of your small business. With an ever-increasing to-do list, it’s tough deciding which task to check off next and which can be put off until later.

When it comes to being financially sound, however, you don’t want to wait. At The Baird Audit Group, we’re ready to partner with you to ensure your business is operating as efficiently as possible. Our team offers a full range of financial reporting. Whether you need an audit, internal or operational audit, AUPs, forensic or fraud examination, litigation support, or even consulting for internal personnel or procedural manuals, The Baird Audit Group will take care of you and your organization.

Located in Augusta, Georgia, we are ready to help you with your financial audit today. Contact us online or by calling 706-855-9500 to find out how we can help your business thrive.


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