Transparency Breeds Trust: What do Regular Business Audits Entail?

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Transparency Breeds Trust: What do Regular Business Audits Entail?

If companies are to have a sound understanding of how they are performing, it is important that they have regular business audits. A Business audit’s purpose is to provide an objective overview of the operational and financial health of the company. This, in turn, can be presented to investors and other stakeholders in order for them to assess the viability of the business moving forward.

Here we explore what regular business audits entail.

What the Audit Involves

For an audit to have any real worth, it must be conducted by an independent and well respected audit company. The audit company will need to examine several areas of the business and gather information that will be used to write a report. The report will act as a validation for the financial statements of the business.

The type of information the auditors will want includes a managerial perspective regarding the organisation, how it operates, financial reporting and evidence of any errors or fraud that may have taken place.

Taking an analytical approach, they will look at how the accounts are balanced and any anomalies, both in the accounts and the records of transactions. Testing the systems that feed into the accounting procedure validates the accounts and therefore the financial statements.

In addition, they will want to account for any receivables, by way of unpaid invoices and may contact customers and clients in order to do so.

Once the audit is complete, a report is written that will summarise the findings and offer recommendations regarding how the business can improve its operational and financial activities.

The Audit Does Not Involve

Business audits are wide ranging in terms of what they involve, but there are many things that some businesses may expect but which they do not involve, in order for the auditors to remain independent.

Auditors cannot be held responsible for a business’s financial statements, nor are they considered as part of the management team. Therefore, they cannot play an active role in implementing any changes to the business past, present or future.

This means they can’t make changes to documents, make transactions or instruct employees in any way that involves the day-to-day running of the business. To do so would undermine the entire process and risk losing the trust and confidence of investors and/or other interested parties.

Business auditors must remain objective, if their findings are to be viewed as authentic and true, that is to say, transparency and neutrality breed trust.