When running a business, it is essential to maintain accurate financial records. Here are our 6 reasons for auditing financial statements. There are numerous reasons for auditing financial statements. When running a business, it really is essential to stay on top of the paperwork so you can continue to successfully grow your business.
The busier and more profitable the business becomes, the more important it is the have a handle on your finances. Frequent auditing of your financial records are the way to achieve this.
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What is a financial statement audit?
A financial statement audit is the examination of a company’s financial records. This can be carried out by an external independent auditor, who is then able to report on the accuracy and fairness of the statements, but it can also be maintained internally.
A simple thing like having your financial statements audited can be a detail that easily slips through the net, but there are many compelling reasons to make sure you include this task on your to-do list.
Business Tip: A simple and accurate audit depends on your business having kept up accurate bookkeeping.
6 reasons for auditing financial statements
1. To ensure accountability
The larger a business grows, the more important it is to keep track of who is accountable for what. This is especially true when shareholders are on-board and accountability is a demand. Managers need to ensure they are keeping up to date with providing accurate reports as far as they can, but there is no substitute for an independent audit of financial statements to crosscheck performance.
2. To Provide reliability
The tax office, financial institutions, and management can all benefit from seeing audited financial statements. With an independent financial audit, tax officials can rely on the accuracy of the information you provide for their own calculations and decisions, for example.
Business Tip: Another considerable benefit of reliable financial statements is that management can use the audit information to tighten up and inform their own audits and reports.
3. It offers assurance
Whilst no audit can provide 100% accuracy and assurance, it can certainly go a long way. A level of reasonable assurance can absolutely be obtained from a well-carried out audit, potentially saving any later recalculations or corrections of misstatements. This offers a level of peace of mind that few other checks or protocols can provide.
4. Provides a complete report
A small but very significant detail is that an audit will provide a complete report on the shape your business is in. The valuable thing to appreciate here is that it’s often what doesn’t get reported that makes all the difference. Having complete records means that whatever happens, you’ll have comprehensive and up-to-date information when you need it.
5. Gives the chance to get feedback
When it comes to protecting your business, an ounce of prevention is worth a pound of cure. If you’re not aware of any potential issues or glaring gaps, you have no power to fix them. This is the key to an audit’s value and could even make the vital difference between the success or failure of your business.
Business Tip: One of the best reasons for auditing financial statements is to future-proof yourself. In the long term, an audit protects your hard work and investment.
6. Can help to boost credit rating and value
Regular or continuous auditing of financial statements is an attractive part of any business package for lenders, creditors, and investors. It can help to stabilise the credit rating of a business, provide assurance to would-be investors, and even keep the bank onside in the event you need to take out an unexpected loan.
If you’re still looking for reasons for auditing financial statements, think of it as necessary housekeeping. Your products and services look after your customers, your profits look after your business, and your auditing looks after the creditors, lenders, and financial angels who look after you. At the end of the day, it comes down to respecting what you have. This is the key to seeing the value of your business rise and remain buoyant.
If you need advice on financial statement audits, get in touch with our Audit team today on 08442 492 209 or contact them online.