Year End closing – Audit
Generally, most businesses and small businesses, in particular, don’t consider getting their book of accounts audited unless it is required either by Government authority, bank or customer for a credit check.
An Audit provided performed properly, not only acts as a monitoring tool but also helps business owners, shareholders, investors & management understand the current business position in comparison with previous periods with a glimpse of future business prospects.
Here are a few benefits which are often ignored by not opting to get the books of accounts Audited.
An auditor ensures that income generated and expenses incurred are related to underlined audit period hence resulting in accurate profit or loss for the period. This is very imperative particularly in cases where a partner or investor is introduced during the period, any income or expenses moved over from the previous year or moved to the following year will result in the wrong profit or loss and eventually could mislead the decision-maker. Another example is again often small businesses if not audited don’t take into account wear & tear or amortization of assets (furniture & fixtures, website, etc) hence give rise to overstated profit.
Other examples may include rent, wages and utility expenses these are accounted for expenses only when paid and often are not accrued hence giving rise to overstated profit, a proper audit can eliminate such problem.
Compliance and internal control
A professional auditor will conduct the audit in line with international standards & local laws. Effectiveness of business policies & internal controls such as HR & procurement policies will also be tested. For example, an auditor will ensure that employees end of service benefits are accrued and calculated as per labor law. Further auditor will ensure payments issued are documented as per the guidelines issued in the procumbent policies. In case, there is no HR are procumbent policies it can be created in light of auditor findings of possible errors & omissions in these areas.
Credibility & Reliability
Consistently audited business is regarded as more credible. Audited reports shows continuity of business hence gives confidence to suppliers, customers to continue building relationship with the business. It also helps build confidence of management, shareholders, owners and employees such that they feel proud to be associated with the business.
Analytical reports, budgets & forecast.
An audit not only helps a business understand risks factors such as its ability to pay its liabilities in next year but also makes available more reliable data to decision-makers. The comparative audited report helps businesses draw average growth rate over previous periods which can be used as the foundation to budget for next year and can also help for forecasting possible outcomes while taking on board a new project, product or team.
An auditor is extra pair of eyes, often we tend to overlook our or even of other mistakes who work closely with us. Also with VAT implemented recently, Audit can help all the businesses regardless of its size to have fully complied with VAT laws and it helps you be prepared for potential future audits by FTA (Federal tax authority).