The added responsibility of managing an audit on top of your day-to-day responsibilities can feel like an inconvenience. But it helps to keep in mind the benefits of having an audit that truly outweighs the inconveniences:
- Provides a reasonable level of assurance (not 100%)
- Provides more credibility for selling a business or applying for funding
- Provides feedback on processes and internal controls
The most important benefit provided by an audit is the level of assurance you will get from an audit. Although it does not provide you 100% assurance that the financial statements are not materially misstated due to error or fraud; it does give a reasonable level of assurance. This allows management or other stakeholders to be more confident in the numbers.
Given there is a higher level of assurance given to the financial statements, this can assist with giving the financial statements an additional dose of credibility. Mainly the credibility is derived from the fact that an audit must be performed by an independent Certified Public Accountant (CPA), thus there is no incentive for us, the auditor, to provide misleading financial statements. In turn, that credibility allows a lender, investor or potential buyer of the company to be more confident in the financial information and the position of your company. Often, potential buyers will want at least two years of audited financial statements. Preparing your company before it goes on the market by getting audited financial statements saves time with having to get catch up audits done when you are farther along in the sales process.
Another great benefit of having an audit performed is the fact that, although the opinion is on the financial statements of your company, we are required to gain an understanding of your company’s processes and controls. We will not express an opinion on the controls, but we do analyze those processes and controls to identify any audit risk areas. Even if we do not identify an audit risk area, we may identify where improvements in internal control could be made. This can be extremely helpful to private companies if there is a smaller accounting department as we may identify areas where segregation of duties can be stronger. In addition, it is not unusual for us to have several internal control or efficiency recommendations for a client with its first ever audit.
In the end, we would really like to help your company understand that an audit does not have to be a major inconvenience and there is other value provided by an audit. While audits are usually performed to satisfy certain bank or regulatory filing requirements, we like to bring more to the table with an audit than just the audit report. Contact your Henry+Horne audit professional with any questions.