Getting ready for an audit can be stressful, but with enough preparation, it can be done successfully. This article will help you understand how to prepare for audit and the importance of auditing.
An external auditor is a third party that provides unbiased opinions. Since they are not bound by any conflict of interest, they can provide more accurate and unbiased reports.
An internal auditor is a person who works for a company or organization. They do not usually work for the outside auditor.
These examinations are carried out by tax collectors to ensure that the financial records of the government entities do not misrepresent the taxable income of the individual taxpayers.
Importance of Auditing
An auditor is required to maintain the trust and efficiency of the financial markets. It is also conducted to prevent fraud and manipulation of financial records. Financial statements are often presented in a way that is objective and provides vital information to various decision-makers. A trusted financial statement can help investors make informed decisions about a company.
How to Prepare for Audit
While preparing for an audit it is important to ensure that the company receives a clean and unqualified opinion.
Steps to ensure a successful audit include:
1. Planning for the audit
It is important that you prepare for an auditor’s visit as early as possible. This can take up to a few weeks to a few months
To prepare for the audit, availability of time and additional resources are necessary. Establishing expectations and planning for the audit are also important steps.
Records should be kept up to date throughout the fiscal year. It can reduce the pressure at the time of the audit.
2. Keeping up with accounting standards
Due to the complexity of the regulations and the changes in the accounting standards, it is important that the finance team is updated regularly. So keeping the records up-to-date is critical. Invariably it reduces the time when we need to find data and makes the process easier when it comes the complying with the regulations.
3. Assess organizational changes
If the company has already been audited, then the changes in its financial position should be taken into account. Along with that, the non-financial changes should be considered as well in the process, such as the internal control operations of accounts and changes in systems and standards according to various laws.
4. Learn from the past
Review previous years’ audit notes and recommendations. Improve by adapting and ensuring that past mistakes are not repeated.
5. Develop a timeline and assign responsibilities
Review and assign the requirements of the auditor’s report. Work with the person to assign each item and set a due date.
6. Organize data
Working papers, details, Vouchers, invoices, and schedules should be organized and prepared to be submitted:
General ledger
Fiscal year budgets
Invoices and bills
Transaction records
Financial statements
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