Financial Audit: The Multi-Tasking Business Booster
Historically, financial audits have carried the reputation of being “dreaded” and “burdensome”. Something you only complete if it is required by law. The idea of a voluntary audit seems absurd. Until you understand the multiple business benefits of an audit beyond legalities compliance.
Audited financials show both the shareholders and stakeholders that a company is transparent, willing to comply with the law, and demonstrates good business ethics. In short, it is an investment in your businesses future.
Secure a Cash Injection By Giving Business Investors Reasonable Assurance
If you want to apply for financing to grow your business, financial institutions will require audited financial statements. They provide a verified, accurate view of the enterprise’s financial health.
This way, funders can see where any possible risk lies. It is important for an investor when they are deciding where to put down capital. Therefore it makes sense to have your statements of financial position audited regularly.
Safeguard Business Sustainability
As mentioned above, your financial statements play a critical role in assessing your business standing.
An audit is an annual health check for your business. This is important for numerous reasons that mainly come down to risk mitigation and future-proofing.
1. Mitigate Risk: Avoid Potentially Devastating Pitfalls
Audits are the perfect way to identify weaknesses such as where you are perhaps overspending in certain areas. The most significant advantage of all is that auditors can detect and pinpoint the root of fraud within your business.
Armed with knowledge, you can immediately plug the holes and implement measures to prevent future incidents. Leading to the next point.
2. Maximise Business Potential
The same way that an audit helps to uncover weaknesses; they also shed light on ways that you can make your business more efficient and effective.
You may notice that one revenue stream performs far better than another that uses as many company resources. Now you have the data to justify the strategic business decision to stop the less fruitful activity and double up on the one with proven efficacy.
Compliance with the Companies Act
The Companies Act 71 of 2008 lays down guidelines for what businesses should be audited. The Act states that the companies subject to audits or financial statements must prepare such within six months after the close of the fiscal year.
According to the Companies Act, the following businesses must be audited:
- All public and state-owned companies are thus required to be audited.
- Any other company whose public interest scores in that financial year is at least 100 (but less than 350) and whose annual financial statements for that year were internally compiled.
An Independent accounting professional as laid down by the Act must audit these businesses. An accounting professional is a person who is:
- A registered auditor in terms of the Auditing Profession Act, 2005
- A member in good standing of a professional body that has been accredited in terms of Section 33 of the Auditing Profession Act, 2005
- Qualified to be appointed as an accounting officer of a close corporation in terms of Section 60 (1), (2) and (4) of the Close Corporations Act, 1984
- Does not have a personal financial interest in the company or a related or inter-related company.
Auditing and Assurance: About Mandatory and Voluntary Audits
Should Your Business Be Audited? Questions to Ask
If your financial year-end finished in February, you only have six months to prepare all your statements for an audit.
Audits have financial implications for your business, as well as time factors that must be considered. It may be better to spend money now on an external audit rather than wasting time and money in the future when your company requires up to date audited financial statements.
Here are some questions to keep in mind when reviewing if your company should be audited.
- What will the financial implications be for your business should you need to audit your financial statements in the future?
- Are you considering selling an interest in your business sometime in the future? Buyers or potential partners might need audited financial statements.
- What effect will a SARS audit have on your business? Are your financial records and documentation in order should SARS require an audit?
Save Money And Time Now
Save your business money and time in the long run. It can be very costly if audits are not done regularly. Additional fees are charged to prepare audits from years where no audits were performed.