Share
Aside from having good communication among partners, trust is also crucial in every relationship—may it be platonically, romantically, or even in the business industry.
Trust affects every aspect of your business. Ultimately, it is the glue that holds business relationships together and allows your company to reach its highest potential.
The fact remains, however, that trust in business never comes easily.
You’re probably reading this blog because you’re thinking of how you can win the public’s trust, or at least that of your stakeholders, e.g. employees, investors, among others for your business.
And we’ve got the answer for you: conducting an audit.
What does an audit do?
Audits are independent examinations of your company’s financial records, usually done by an outside authority. This enhances the credibility of financial statements and gives stakeholders peace of mind that the accounts are accurate.
An audit report illustrates whether the financial statements give a true and impartial view.
Businesses of all sizes should conduct audits. A positive audit opinion can guarantee small businesses to secure loans and can be of great help in pinpointing areas where they lack internal controls and regulatory compliances.
Auditors are those who perform audits. In addition to reviewing financial records, they also help in checking suspected fraud and employee theft.
From a business perspective, hiring auditors is a factor that helps businesses succeed in the long run. Performing a business audit ensures integrity within the organization.
Note that there is no one-size-fits-all approach here. Some common types of auditing that can be used by businesses are listed below.
Financial Audit
A financial audit, also called a financial statement audit, provides an accurate evaluation of your company’s financial statements, such as records and information.
The purpose of financial audits is to reassure your stakeholders that your financial position is fair and true. This will minimize the risk of fraud—as well as making sure that financial mismanagement does not take place.
A financial audit should be conducted annually and may be done by an employee of yours or by an independent party.
Your financial information will be rigorously reviewed and necessary documents will be gathered for this type of auditing.
Feeling nervous upon performing a financial audit? Worry less because preparation will pull you through. We recommend you keeping track of all financial transactions in the year to help you avoid feeling frightened in the future.
And in case the results are ideal, you just thought of maintaining the robust accounting procedures on the regular.
Compliance Audit
Compliance audits really do not focus on the financial aspect of your company. It examines your business’s procedures and policies to see if they are in compliance (hence the word compliance) with company and governmental standards, such as compliance preparations, security policies, risk management procedures, and user access controls.
This type of audit also determines whether your organization conforms to an agreement, such as when it accepts government funding. It also identifies non-compliance with regulatory guidelines and may result in sanctions and penalties.
In simple terms, this audit somehow recalls you to reaffirm your stance on the policy and procedure you vowed to follow upon the launch of your business.
Operational Audit
An operational audit analyzes your business’s goals, procedures, and operation results. This report provides a detailed overview of trouble spots for optimizing workflows, identifying risks, and tweaking internal controls. Your business can be future-proofed against damage by monitoring these ahead of time.
This audit should not go unnoticed as it assists you in optimizing sales, steamlined production processes, and systemized flows—all critical aspects of running a business.
Identifying risks by performing this audit report ahead of time can future-proof your business against damages.
Hence, an operational audit’s goal is to examine business operations and determine ways on increasing productivity.
Pay Audit
Your business may conduct a pay audit to identify pay disparities and opportunities for improving equity, therefore ensuring that all of your workers are fairly paid in accordance with your business’s industry and location.
Conducting a pay audit can be a lot of work. It gathers information about each employee’s paycheck, race, ethnicity, gender, hours worked, job title, education, performance evaluation, and so on. Note that this information needs to be accurate and current.
Auditors report the information obtained directly to management and not to outside parties or entities.
This audit is the best practice to analyze your company’s current stand in terms of compensation and revisit how you handled starting payments, promotion, benefits, and incentives.
How often should a business be audited?
Audits must be scheduled based on regulatory requirements, management and shareholder needs, and/or the intensity of suspected wrongdoings within the company.
It can be performed monthly, quarterly, or once or twice a year depending on the criteria and what kind of business you are operating.
Wrapping it up
Suppose you are a fresh graduate looking for a job, or an investor looking for a return on your investment. You probably wouldn’t want to be tied to a company that doesn’t follow regulatory laws or even pays its employees on time. You’d then feel ripped off!
You can think of audits as a way to keep your company accountable and transparent. This may help you figure out where things might have gone wrong, what factors were at play, and how to improve operations.
It’s now crystal clear that a company couldn’t thrive without consistently making their audit reports available for the stakeholders.
With an effective audit function, there would be a proper risk assessment process that will minimize the risk of loss to your business. And more importantly, a clean audit opinion from auditors can guarantee your business to gain confidence not only of your clients but also of investors and potential partners.
Related Reads:
The Verafede Journey: From Designs to Experiences
7 Ways to Work Your Way Around Traditional and Digital Brand Activations
How Do You Make Your Business “Pandemic-Proof”?
Heads Up, Start-Ups! Marketing Tips for Start-Up Businesses in 2021
Trishia Serrano
Trishia Serrano is a senior studying Bachelor of Science in Business Administration Major in Financial Management at Polytechnic University of the Philippines (PUP) Manila. She is a finance intern at Verafede Inc. She enjoys alone time staring at the sunset, she is into poetry and music, and she loves to read anything that could help my personal and career growth.
