29
Jan 2020
The corporate world is a competitive market where the business entities constantly compete to gain a better position, fame, with an ultimate goal of acquiring profit from its targeted customers. Now, the definition of a good or a bad company can be defined, only if, one knows the inside proceedings of business. Audit plays precisely the role of a scrutinizer or an inspector wherein it inspects the overall working scenario of a company. It turns out to be a mandate for every organization to take a step and conduct the external audit process, at least once a year. Upon completion of the process, an audit score gets assigned. Higher the score, higher the benefits. In case if the low rank has been assigned, the necessary steps are to be taken over a specific duration to rectify the same. This guide will help you to understand how to recover from an audit low ranking. Let’s start from the basics and understand about audit score.
What is an Audit Score?
Upon inspection of the internal and external environment of a business entity, the external auditor assigns an audit score in an audit report. This score signifies the status of a company in numeric value. The audit report turns out to be an essential document as it gets shared with the business stakeholders. Imagine if your business scores a high audit score, it signifies that your company maintains the internal as well as the external proceedings legally. On the other hand, if your company fails to achieve one, then it turns out to be troublesome for you. Let’s understand the causes and consequences of low audit score.
Causes of Low Audit Score
The core causes of low audit score are highlighted below.
- Errors in business books
- Illegal practices taking place in the business premises
- The external relations are not well-maintained
- The internal audit findings have not been implemented
- Tax and VAT proceedings are not maintained
- The company bad-debts gets increased
- The business entity turns out to be a bad-debtor
The points mentioned above ultimately ends in ruining the reputation of the business. Now, let’s take another step and understand the consequences of the low audit score.
Consequences of Low Audit Score
If your company has been assigned a low score, then you will face the following consequences:
- The goodwill turns down in the eyes of the auditors
- The reputation also gets affected in the eyes of the government
- Business stakeholders trust gets lost
- The path for new investors gets blocked
- The productivity of employees goes down
- Employee attrition rate becomes high
If the points mentioned above gets executed in a company, it is an alarming call for the management to take the remedial steps. In case, if it gets delayed, the result could turn out to be company liquidation. If your company is showing any of the traits mentioned above, then you should take a look at it to implement the remedial proceedings.
The Recovery Steps
By taking a step forward and implementing the points mentioned below, you will be able to recover your organization and earn a good audit score in the next audit process.
1.Deep Dive into Accounting and Bookkeeping Records
You need to make sure that your business books are clear. The bookkeeping and accounting process depict the complete working of your business in the form of numbers. A transparent and error-free accounting and bookkeeping records will help you to understand the business transactions in a better way. In case, if any errors are highlighted during the external audit process, you need to rectify the same immediately to avoid further confusion.
2.Manage Separate Books for Debtors and Creditors
Another important task that you need to do is to maintain separate records for your business debtors and creditors. This will give you better clarity regarding the amount that you owe to your creditors and your debtors owe you, which will help you to maintain your business relations as well.
3.Check Your Business Cash Flow
The next focus should be to keep a continuous check on the business cashflows. Doing this will help you to track the cash inflow and outflow activities. Moving ahead, it will also help you to do ahead with effective business planning and correct implementation to diversify the business inflow means.
4.Manage the Tax and VAT Effectively
As per the VAT rule implemented by the UAE on 1st Jan 2018, the business entities are entitled to pay the VAT @5%. Maintaining a proper record of the VAT and Tax record will help you to file the returns at the end of the financial year.
5.Better Management of Payroll Services
The employees of a company turn out to be the real asset of the organization. Paying them on-time keeps them motivated, and ultimately, they take a step forward to contribute their best in uplifting the organization. Errors in the payroll records will be a demotivation for the employees due to which the productivity gets decreased. Additionally, it will harm the organization to a great extent in achieving the ultimate goal.
6.Draft a Budget for Your Business
A budget is a valuable tool that every business must prepare to make the best utilization of the revenue generated by conducting business activities. Maintaining and following the budget on time will help you to keep a track on the financial stability of your business, and you can implement the business plans accordingly.
7.Implement Internal Audit Findings
Take a step forward to implement the internal audit in your company to understand the internal errors that need to be fixed. Once you are aware of the internal loopholes and fix them, half of the problem gets sorted. Similarly, when the external audit conducts the process and pen down the recommended solutions, make sure to implement them as it is asked.
Thus, you have seen several reasons through which you can recover your low audit ranking. After the implementation of the points stated above, make sure you implement an external audit process again to measure the difference. It is recommended to go ahead with experienced professionals as they turn out to be the subject matter experts. Dealing with experienced professionals will help you to understand to make the best business plan and execute it effectively to benefit your business. At JAXA Chartered Accountants, we stand as a team of DAFZA and JAFZA Approved Auditors who are dedicated to providing the best and professional audit services to our clients. Since inception, we have helped multiple clients to carry out their audit proceedings. Our business experts are well-versed with the procedures and provide tailored solutions according to business needs. In case you hold any query, do speak to our experts-we’d be glad to assist.