What is a company audit and why is it required?
The term audit refers to the process of examining and evaluating your business’s financial statements.
During an audit, an auditor checks if the business’s financial statements are complete, up-to-date and correct. An auditor’s job is to ensure that your bookkeeping activities are adobe board and that your financial statements are a reflection of the real financial position of the business. A well-audited, up-to-date business grabs the attention of potential funders who want to invest in your company.
Four reasons why Companies are Legally Required to be Audited:
- An audit is important as it provides credibility to a set of financial statements and gives the shareholders confidence that the accounts are true and fair, and can also help to improve a company’s internal controls and systems.
- Auditing ensures the integrity and compliance of your accounts with Generally Accepted Accounting Principles (GAAP).
- Section 90 of The Companies Act No. 71 of 2008 requires a public or state-owned company, upon its incorporation, and each year at its annual general meeting, to appoint an auditor. All public and state-owned companies in South Africa are thus required to be legally audited.
- The Regulations provide that in addition to public and state-owned companies, where the audit of any other company is desirable in the public interest as indicated by prescribed criteria in any particular financial year, those annual financial statements must be audited.
What happens if you fail your audit?
Unfortunately, many business owners only realize the true value of auditing after failing their audit.
If an auditor finds out that your finances have been tampered with, or are not sound in any way, your business could face legal consequences. This can lead to not only a financial loss, but damage to reputation and a loss of confidence from shareholders and investors. In order to avoid this, it is important to incorporate your audit into your yearly planning and to make sure that your finance function is up to date. If you do not have the necessary staff on board to handle this function seamlessly, then consider outsourcing your financial statements to a specialist company such as OutsourcedCFO. In this way, you have the necessary expertise on call to ensure a stress-free audit, without having to fork out for specialist staff on a monthly basis.
How to prepare for your audit:
- Start with planning: Make a note of dates and deadlines, and ensure that you and your accounting staff are aware of what needs to be ready for each submission date. If your in-house staff do not have the expertise to prepare financial statements, line up the experts before a crisis hits.
- Make sure your accounts and all relevant records are up to date and correct. This means using the latest cloud-based accounting software packages in order to streamline and automate as many processes as possible. This saves time and cuts out human error.
- Streamline paperwork such as receipts and invoices. Make sure that your staff realize the importance of submitting paperwork accurately and on time. Explore software options like Dext, which integrates with Zoho and allows you to scan and upload receipts digitally, as this will streamline the whole process.
What could go wrong?
Closing off your account and getting them ready for an audit can be challenging – watch out for the following sticking points:
- Financial records not complete
- Missing or misplaced documents such as receipts and invoices
- Incorrect entries due to human error
- Ineffective communication between various entities leading to missing data
- Untrained staff who do not have experts knowledge
Calling in the OCFO experts to assist with your legal audit requirements:
The outcome of an audit is crucial for your business. The auditing of your financial records may either spell success or create additional work for you, based on the transparency of your records. But it’s a process worth going through as it provides assurance to stakeholders that your business is true and fair. To nail any audit process, the key task is to keep your business financials up to date, but you might not necessarily have the expertise or manpower on your payroll to finalize your audit without a hitch.
But what should you do – appoint an expert when you will only need them for a few weeks or months a year? No – the solution is to plug in additional accounting expertize on an outsourced, to help you and your team get this year’s audit done on time – without placing a permanent burden on your payroll. Call in OutsourcedCFO and get in extra hands that understand the audit process and can help your team with the preparation of audit packs, answering the multitudes of audit queries, and everything else required to get the audit over the line.
Your internal finance team works hard to get each and every transaction of the whole year summarized to a trial balance level. Compiling financial statements on global financial reporting standards is however a fairly specialist task. Get this off your senior finance team’s desk, with expert drafting and consolidation expertise, allowing you to nail your audit requirements. We love helping groups compile sets of financials at full IFRS or IFRS for SMEs level that will pass the standards of any top 10 audit firm, and set you up for a stress-free audit. Further support on adjustments, audit queries and finalization of financial statements enable your team to stay focused on the current financial year’s mission, without being tied down by the previous one’s reporting requirements.
If your business is facing a sticky audit, and you are not sure of your legal audit requirements, you will benefit from the services of our expert accounting team. If you need to know more about how we can help, contact us today for a consultation or take a look at our available packages here.