Independent Financial Audits – Critically Important to Your Business

When was your last independent financial audit?  Why are such audits important to your business? The experienced accountants and other professionals at Maicher CPA Pllc provide a full range of audit services to help your business succeed.

What are independent financial audits?  

First, the word “independent” generally means an audit done by a party (e.g. certified public accountant) who is external to your business (i.e. does not have ownership in or an operational role in your business, among other conditions).   Second, “financial audits” are objective evaluations of your company’s financial reports and financial reporting processes to ensure accuracy.  An audit usually involves four phases: (a) plan and design of the audit approach, (b) performing a test of controls and substantive test of transactions, (c) performing analytical procedures and tests of details of balance, and (d) completing the audit and issuing an audit report.  In general, these steps require the auditor to: examine source documents, obtain third party confirmations, conduct physical inspections, and test internal controls, among other things.  

Why are independent audits so important?

First, the audit aims to ensure that your business is tax compliant with respect to IRS rules and regulations.  An independent auditing firm can evaluate your business without the fear of repercussions if it discovers a deficiency.   On the other hand, an internal auditor (e.g. your in-house bookkeeper) may face personal blame for a deficiency and therefore be inclined to sweep a problem under the rug which almost always compounds it.   Second, an independent audit provides added credibility to your financial statements enhancing your ability to obtain loans and investment capital. Third, certain types of customers, including governmental agencies, may require an independent audit in order to do business with you.  Fourth, to the extent your company has a 401(k) plan and other benefit/retirement plans, an independent audit may be required. Fifth, your internal documents, including buy-sell agreements and other succession documents, often use independent audits to calculate stock values. Sixth, independent audits help guard against fraud, embezzlement and other misappropriation committed by company insiders who can be very skilled in covering-up wrongdoing. 

If you are a business owner, there are probably several reasons why you would benefit from a professionally prepared, independent audit.  Call Maicher CPA at 612-839-1483 to discuss your audit needs.   

Sources:
“3 Times Your Business Should Call In The Experts For Audits,” Forbes (April 20, 2019).
“Looking To Borrow? You May Need An Audit, Review Or Compilation,” Forbes  (Nov 26, 2016).