Finance stands as one of the significant drivers of a business entity that keeps a check on the financial flow. Moreover, it projects the sustainability and growth prospects of the organisation. A financial audit can contribute a lot as it helps in figuring out the loopholes, and also check that all the business transactions are legalised.
If you are a business owner, then conducting a financial audit can help you in boosting your profits. The audit process requires specific prerequisites. In this article, you will get a clear idea regarding the financial audit process and the way it is to be performed. Let’s proceed.
Essential Tasks before the Audit Process
Communicate the finance track plan to the employees
- Align the accounting and reporting statements
- Take account of all the fixed assets
- Keep a digital record of all the statements
- Correctly categorize the expenses
- Close books each month
How to Prepare a Financial Audit?
To prepare a financial audit, the following steps are to be taken accordingly.
1. Communicate, Get Organized and Plan
As a business owner, you need to plan the company’s financial stability. To proceed to that step, you need to communicate to project to your accountant. It would be best if you did this beforehand, and have a clear idea regarding cash, accounts receivable, inventory, accounts payable, and accrued expenses, to get a clear idea regarding the company’s financial stability.
2. Review Your Financial Records
Before an external auditor audits your financial statements, it’s always on a safer side to do an internal review, which will help you to figure out the immediate loopholes and fix it. This can be a time-taking process, but then if you are a business owner, you need to know your numbers. If you hold a clear idea regarding the figures, later on, you will be able to explain it the external auditor upfront.
3. Keep your documents handy
It is advisable to keep all the necessary records to keep in hand before the external audit process gets initiated. An audit preparation checklist includes:
- Up-to-date general ledger
- Trial balance
- Audited financial statements
- Bank statements, accounts receivables, inventory, and other subsidiary accounts
- Statements of priced inventories, fixed assets (after depreciation)
- Schedule of prepaid expenses, loans, trade payables, and other liabilities
- Schedule of accrued liabilities
- Corporation minute book
- Stock certificate book
- Bank statements, cancelled checks, invoices, insurance policies
4. Categorise the Expenses Correctly
Once you deal with the accounting and bookkeeping records, try to categorise your expenses accordingly. Maintaining the costs in the correct order will help you to track the finances easily and will also prevent any mishap.
5. Categorise the Expenses Correctly
Fixed asset tracking plays an important role during an audit process. Make sure that you keep a digital record of all the fixed assets that your company holds along with its value. It will be beneficial during the audit process, and will also give a bright idea to the external auditor.
6. Close your books every Month
Indulge a habit of closing your accounting books every month. This will help you to keep a financial track every month. Also, it turns out to be easier to catch any fraud, if taken place at any point in time.
7. Request Documentation
Once the audit process gets over, request the external auditor to provide the necessary documents that you will require further. Following the guidelines will help you to avoid mistakes in the future.
Benefits of Conducting a Financial Audit
- Shareholder’s sense of comfort gets lifted
- An accurate picture of the company’s performance gets highlighted
- The chances of acquiring current and potential investors increases
- It plays a significant role in Tax-Saving
- Opens a broader opportunity in case you want to sell your business
- Audited financial records can reduce future costs
In short, we can say that the audit of financial statements can uplift a company to its next level. A good audit score can help you to grab the target market quickly, and boost the company’s goodwill. It is always recommended to hire or outsource the audit essentials to a professional who holds a good experience in the audit field. Subject matter experts can not only help you in the audit process but will also guide you in a proper way which will ultimately benefit your company. Confused whom to approach? Don’t worry. Your solution is right below.
JAXA has been one of the top audit firms in Dubai. We primarily focus on delivering tailor-made solutions to our clients in multiple domains including accounting, taxation, audit, business establishment process etc. Our business experts are well-experienced and will help you in conducting the financial review for your company. To know more, do contact us– we’d be happy to assist.