From Taxes to Budgets: An Accounting Blog

Posted on: 14 May 2020

When most people think about the idea of an audit, they do so in negative terms. After all, no one wants to have someone looking over their shoulders—or worse, intentionally looking for errors or fraud. But, in reality, an audit is a good thing for your company to request on its own. Here are a few of the benefits your business gets from ordering an audit of its finances.

1. You Learn About Potential Problems

Errors, omissions, misunderstandings, and employee wrongdoing can happen in any company. But if no one is paying attention to your books, you aren't likely to find such problems until they become big issues. You might only find out that you're misclassifying assets after the IRS performs an audit, for instance. At this point, the damage is done and you'll likely end up with fines and penalties. 

2. You Have Confidence in Your Books

If you're a new business owner or aren't very well versed in business finances, you have to rely on the skills of others and what you've picked up so far. An external audit done by an accountant is a good way to learn if you're doing things right. The auditor can help find weak spots in your bookkeeping or suggest ways to improve. In the end, you'll have more assurance that your business is headed in the right direction and your staff is reliable. 

3. You'll Be Ready for Other Audits

Asking for a voluntary audit is good preparation for other audits over which you may have little control. The IRS, Social Security Administration, state tax authorities, and your industry association may all want to perform their own audits at some point. If you haven't ever checked the validity of your own financial statements, the idea of an external agency audit can be a terrifying and alien prospect.

4. Business Partners Have Assurance

Every company has to work with other businesses and individuals at various times. Audited financial statements are key to providing other companies the confidence to do business with you. Lenders, for instance, regularly want to see audited statements before loaning money. Vendors may want audited books before providing large sums of credit, and potential partners are also likely to expect to see auditing occur.

5. You Get the Books Cleaned Up

When you know that an objective third party will be coming in to look at your accounting documents and transactions, you and your staff are more likely to get everything done. Small businesses regularly suffer from a lack of time and motivation to do some tasks (such as filing or tracking depreciable assets). But an annual audit gives everyone the nudge they need to get these things done and be ready. 

If you think your small business could benefit from assistance through an audit, start today by speaking with a certified public accountant with experience in your industry.