Whether your business is a small start-up or a huge conglomerate, you are subject to an often bewildering set of laws, requirements and restrictions and increasingly complex issues of compliance, risk management and more. In general, small companies rely on internal auditing by an employee of the company and this is sufficient for their purposes.
An internal auditor must review the company’s operations and work performed by any and all employees, looking for mistakes and/or irregularities that affect the financial health and reputation of the business. They are tasked with finding and reporting instances of waste or non-performance, fraud or theft and the like. Basically they have to review transactions and processes, compare how they were done with how they should be done, and report any difference.
A careful scrutiny of the company’s practices and procedures is invaluable; it provides the information that allows owners/ management to make the correct decisions and keep the company running and growing. In most cases an audit is required by investors or lenders as an assurance that the company is solid and can be expected to turn a profit. For these circumstances an external auditor will be required; a third party with no biases or any stake in the business being audited.
External auditors are also valuable to small start-ups, as they are more likely to have the training and experience to spot an instance of non-compliance with local and federal tax laws and other irregularities that can be corrected before they become a major problem. By the same token, external auditors can be completely objective in assessing performance and outlining constructive changes, with no regard to any personal issues or preferences.
Any business owner who intends to solicit outside funding, whether from investors or from lenders, should be able to supply an external auditor’s report. That report supplies more credibility than one completed by an employee of the company, no matter how detailed and accurate that employee may be. Funding is more likely to be offered when the auditor’s report is made by an independent firm and backed by that professional assurance.
In purely practical terms, an external cost reduction audit can be advantageous to the company’s health just because it’s looking in from the outside. It can point out the areas where money is being mis-spent or wasted, even in the accounting department, and recommend better and more effective procedures in all departments. It’s up to management whether the recommendations are implemented, but they can often make the difference between on-going success and its regrettable opposite.
An external audit by a certified professional may seem like an unnecessary expense and bother, but the fact is that in today’s rapidly changing business world it’s very difficult for anyone but a specialist to keep track of all the new terminology and procedures. Along with accurate and unbiased reports, auditors can offer valid suggestions for improving your company’s efficiency and long-term good health. They are the best way to insure that your business is operating as smoothly and profitably as it possibly can.