There are words that can strike fear into the heart of any business owner. Claim denied. Slow season. Business tax increase. Tariffs. All of these things can make you want to run for the hills, but none are likely to ruin your day quite so much as two simple words: “Tax audit”. Being audited can take a lot of time, and can cost a lot of money, even if you’ve done everything right; after all, organizing all of your documents for a business audit is a labour intensive process -sparing yourself the effort is one of the most important reasons to hire a Winnipeg accounting firm. CRA audits are usually not pleasant, but some audits are good. The kind of audit you want to occur on a regular basis is a financial audit, and it can help keep your business running smoothly for years.
Financial audits are basically a review of everything to do with your business finances. The most basic component of a financial audit is a review of your financial statements to make sure you have a proper account of income and expenses. A review of all purchases made, sales made, salaries, overhead, and all other components of your business will be made, so that you know the numbers you’re getting back are accurate. When inaccuracies are found, the auditor will help you figure out why, and rectify those inaccuracies.
Better yet, financial audits will help you evaluate the strength of your record keeping. One of the key roles auditors perform is internal control evaluation. This evaluation allows you to determine how resilient your accounting systems are to fraud, and methods you can introduce to make your systems more fraud-proof. By conducting a systemic evaluation, a financial auditor can not only find errors that exist presently; they can also mitigate your risk of producing the same errors due to systemic flaws down the line.
There are two principal categories of financial audit: external and internal. Internal financial audits are meant for your eyes only; they’re a look at how your business could be made more efficient, and they allow you to make changes without any chance of your competition learning about it. External audits, conversely, are used to project financial stability to the outside world – shareholders and other stakeholders may have access to these audits. You can hire a company to do internal and external financial audits, and you may do both in the same year.
As you can see, not all audits are bad; they can be used to shore up your company’s systems, and to project strength when you want investors or creditors to place trust in your company. Having proper accounting procedures in place is one of the key controls you can employ to keep your finances in order.