How We Can Help Manage Your Financial Audits

April doesn’t just bring the stress of taxes, but also two words that not many business professionals want to hear – financial audits. However, having an industry professional help manage your financial audits can be a critical tool to ensure your company is financially stable, your books are accurate, and you are compliant with any and all legal and regulatory requirements. Financial audits are also an important instrument to identify any areas that need improvement for the future of your organization.

Simply put, the financial health of your organization relies on accurate financial reporting. This is where an independent financial audit comes into play. Having an outside organization perform your financial audit will ensure you get an unbiased and comprehensive assessment of your organization’s financial statements to spot any issues or irregularities and improve your financial health for the future.

Navigating through the financial audit process can be overwhelming and even intimidating, which is why, at Critical Connexion, we have a strong understanding and skilled experts who can help you manage your company’s financial audits. We recommend you conduct a financial audit at least once a year. So, there’s no time like the present to discuss how to manage this vital assessment.

What is a Financial Audit?

A financial audit is an independent assessment of your company’s financial statements and records. The word independent is key here; although hiring an outside firm to perform an audit could be costly depending on the size of your company, it is imperative to have someone outside of your organization conduct the audit. That way, you will get an impartial, thorough, and detailed examination of your organization’s financial accounts and statements.

Why should you have a company like Critical Connexion help you understand how to manage a financial audit? Among other things, these assessments are crucial for the following:

Assess and improve your company’s financial reporting: A financial audit will help identify any errors in your financial statements to improve the accuracy or your accounting books.
Comply with legal and regulatory requirements: Depending on your industry, you may be required by law to complete a financial audit at least once a year.
Identify and address any financial risks: Audits are also important at identifying and addressing any mismanagement of funds, or worse, any financial fraud you may not know about.
Improve the internal operations of the company: Financial audits are also a great way of identifying any internal weaknesses and then making recommendations for improvements within your company.
Maintain credibility and transparency with investors and stakeholders: Having a financial audit completed will not only increase your transparency and credibility with current stakeholders and investors, but could also attract new investors to your organization.

It is important to also understand that there are specific differences between auditing and accounting. Accounting is the systematic financial reporting that is done within your company throughout the year, whereas financial auditing may only be done once annually.

Both accounting and financial audits must follow strict standards, but financial audits essentially check on your company’s accounting. That is, a financial audit will ensure your accounting methods are accurate, error-free, and adhere to any Generally Accepted Accounting Principles (GAAP) or Generally Accepted Auditing Standards (GAAS).

What is Reviewed During an Audit?

In order to manage financial audits effectively, we help our clients understand exactly what is reviewed during the entire process. That way, they have their documentation ready for the outside auditor and have an understanding of what is being reviewed, including the following:

Financial statements such as balance sheets, cash flow documents, income statements, and anything else that can provide a financial context for your reporting activities.
Documentation of account balances and transactions.
IRS documentation and communication.
Historical documents (i.e., articles of incorporation, bylaws, etc.).
Financial commitments such as rental and/or lease agreements, employee benefits, loans, or financial liabilities.

The above list is just an overview of what will be assessed during your financial audit. You should always get a detailed list from the auditor before the audit is completed to save time and money.

What are the Benefits of a Financial Audit?

We understand that financial audits can be a frustrating and stressful time, but there are many internal and external benefits that cannot be overstated. Not only may regular audits be required for your company, but they are essential to ensuring your organization is transparent, accountable, and financially stable. Other specific benefits of financial audits include:

Verifying and improving financial management and statements: A main benefit of financial audits is to improve your finances through a detailed assessment of your company’s financial statements. That way, you can discover any inconsistences and areas that need improvement for better overall financial management and health.
Identifying errors and deterring fraud: Experienced auditors can identify any errors or irregularities in your company’s financial records and accounting books you may have missed. This helps you implement corrective measures and maintain the accuracy in your financial reporting going forward. Financial audits will also deter your accounting practices from any fraudulent activities by analyzing data and trends to possibly expose fraudulent behavior.
Improving credibility, accountability, and trust: Once you have a financial audit completed, this document can improve your credibility and trust among your stakeholders and investors (and customers!). Not only that, but it illustrates that you are accountable to your company’s management, board, and anyone else involved both internally and externally.
Maintaining compliance with regulatory requirements and accounting standards: Independent auditors will understand your company’s industry and any regulatory and legal requirements in which you must adhere. They will also ensure your accounting complies with GAAP, GAAS, or any other applicable financial reporting standards.
Evaluating both internal and external controls: Finally, financial audits will review both your company’s internal and external controls. Internally, this will review the procedures and processes you need to uphold the accuracy of your financial and employment records. Externally, it will ensure you uphold accurate and credible financial management practices.

Where Do I Begin?

To help you manage your financial audit correctly, we recommend you take the following initial steps to ensure the entire process goes smoothly from beginning to end:

Gather all the necessary financial documents requested by the auditor (and discussed in this blog!).
Check all financial records for accuracy and completeness to save the auditor time.
Review all internal controls and processes to ensure they are functioning correctly. This includes gathering handbooks, accounting standards, bylaws, etc.
Recognize any new events or significant transactions that may have occurred since your last audit (or over the past year), such as changes in management, large purchases or sales, or financial downturns in the industry.
Learn the specific standards and regulations that may apply to your company as it relates to your financial audit (GAAP, GAAS, etc.).
Designate one person – probably someone in your accounting department – to be the point-person for the auditor throughout the whole process.

The six steps above are only the beginning of the audit process. During the audit itself, you and your point-person will need to be transparent, cooperative, and involved so that your auditor has all the support they need to perform the financial audit smoothly.

And remember…managing a financial audit doesn’t stop once the audit is completed. You will want to review the audit report carefully so that you can implement any changes recommended or required. That way, your company’s financial health will continue to grow and improve for years to come.

About Critical Connexion:

Critical Connexion is a distinguished business management & consulting firm that focuses on leveraging a foundation of leading finance, HR management, strategic sourcing, risk & operations experts to accelerate brand success for clients.

We specialize in navigating the evolving landscape of corporate growth by adeptly addressing changing systems, processes, and people requirements. Recognizing the substantial nature of technology and changing business needs, we ensure that these resources are directed with foresight and expertise. We are your extended partners for business growth, scaling seamlessly and brand elevation.

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Ph: 213-798-6676
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