Financial statements play a vital role in business, from providing insight into performance to detailing trends and shifts to operations that may be hard to see otherwise.
It would be nice to assume your financial statements are always perfect but the audit process is an essential step to help verify the accuracy of the statements. Audits frequently catch errors, identify weaknesses in internal controls, and provide a thorough review of business strategies. Recommendations provided at the end of the audit can provide valuable advice to help management run a more efficient and successful business.
While some companies see both internal and external audits as a necessary evil with minimal true benefits, these tables are starting to turn in many larger operations. With the ability to offer legitimate insight that can highlight opportunities and streamline operations, current research indicates that management employees and board members are truly listening to what an audit’s results have to say.
The Value in the Audit Process
Auditing is a key part of ensuring a business is operating above board, following the law, and employing best practices throughout everything from external reporting to budgeting.
However, auditors also serve another purpose: they provide an outside perspective related to how your business functions. Being on the outside looking in provides a vastly different view than someone who is involved in day-to-day management, offering an impartial peek into how your business is progressing.
While public companies are required to undergo an annual audit by a public accounting firm, private companies are not. However, many choose this route regardless, taking time to provide documents, reports, email exchanges, and more to a team of experts who can offer significant value. And it works: audited financial statements can result in benefits ranging from lower interest rates on loans to a reduced risk of IRS audits, as well as suggestions for improving internal controls and operating procedures.
How Businesses Respond
Historically, audits have been an important part of doing business, but many executives felt that business decisions were best left to internal leadership. However, according to a recent Deloitte study, an increasing number of mangement professionals and audit committee members are actually using audit results to make business decisions. In a survey of 100 audit committee members and 300 C-suite executives, nearly 75% of executives and 91% of audit committee members actively utilize audit results when evaluating business performance and planning ahead for the future. Furthermore, over 70% of all members queried stated that financial statement audits offer valuable insight into ongoing operations.
The numbers regarding the success of the audit process speak for themselves as well. The same study also concluded that businesses that utilize the results of an audit are 22% more likely to achieve growth that is perceived as “good” (a score equivalent to a 7 or 8 on a 10-point scale) than those who do not.
With the right resources, it’s possible to do amazing things for your business. Rather than simply assuming all is well, an audit can help you be sure, providing an educated and objective approach to the reality of your company’s financial position.
Offering a full range of audit services, Klein Hall CPAs is prepared to help you hone in on growth opportunities, overall financial health, and strategies for future success. Contact us today to learn more!