Auditing is something that is needed for business progress that assesses the documentation and evidence of the economic transactions of a company. Without auditing, the office does not have independent examination and open-minded people to obtain financial statements. There are still many companies that do not see that auditing is a primary need, and are still thinking about other things. Why auditing is important? This article will answer your questions about this.
What is auditing?
Auditing is an official inspection and verification carried out by business' management, by government, or outside parties to check the credibility of financial reports, in case there is suspicious financial activity. Auditing can be done to check all financial records, from individuals to businesses.
The main goal of auditing is to ensure that the company has accurate financial statements and follows regulatory guidelines. Auditing provides confidence to creditors, investors and stakeholders as assurance that they can rely on your company.
The different types of audits
There are several types of audits that businesses can choose from to assess the overall company health. The following are several different types of audits:
- Internal audit
This audit is carried out with the company, with the owners taking the initiative to get the firm audited. The internal auditing is needed to update company board members about the finances.
It helps the company to check and adjust to the firm's financial goals.
- External audit
The external audit has requirements and rules made by its shareholders. External audits are carried out at annual general meetings, to be shown to all shareholders and board of directors meetings. This audit can be done half-yearly, quarterly, or annually.
- Performance audits
Auditors will conduct performance audits by assessing business systems and processes, while measuring their productivity and efficiency against business goals. The main objectives of performance audits are business perspective analysis, evaluation of the company's internal control, and assessing program results and effectiveness.
- Operational audits
This audit is almost the same as an internal audit, the difference is that agents are hired to improve organizational operations and check which areas are less efficient.
The main goal is to align the company with its goals, analyze the policies, check for progress, and see the outcomes of its functions.
- Information system audit
The digital era means that every company will use software to speed up its business performance. But the company still needs an audit to check whether there are IT risks, how the security of the company's data can be guaranteed, and what preventive ways the company can minimize data breaches. The report of this audit will ensure stakeholders that the company has carried out data protection properly, and the business structure is always updated.
Why auditing is important for your business?
There will always be reasons to answer "why auditing is important" because we have to know the background of why we have to carry out an audit by hiring auditors for the progress of our business. Here are the 5 main reasons why auditing is vital for your business.
- Provides objective insight
Every company will not be able to audit your own work, because they could face a conflict of interest. To remain objective, you must hire an auditor or team that does not have any operational responsibility. Companies must have a different, independent and unbiased view, to add value to the organization. Auditing purposes can be carried out by cross-training employees in different departments, to see office conditions broadly and from several different points of view.
- Evaluate risks and protect assets
Audits will help management to identify and check risks through a systematic risk assessment. A remediation plan can be carried out if the risk assessment can identify any gaps in the work environment. Every environmental change will be tracked and documented, to ensure that mitigation will uncover risks. Every asset must be safeguarded, and every risk must be considered.
- Improve operations efficiency
An objective review of organizational policies and procedures is needed, because the company needs to ensure that it has followed the right procedures and policies. Company policies and procedures must be aligned with possible risks in order to overcome various forms of company risk.
Monitoring and evaluation must be carried out on an ongoing basis, so that you can identify suggestions for business progress and increase its efficiency and effectiveness. Once the audit runs smoothly, your organization will trust the operational process and it can be carried out regularly and efficiently.
- Assesses controls
Companies need internal audits to improve the organization's control environment. This is needed to assess the efficiency and effectiveness of operations. Internal audits can be used to ensure whether risk mitigation is adequate? Are the company controls in accordance with the purpose? All company controls are only useful to help the organization, but auditing also helps you achieve its goals.
- Ensure compliance with laws and regulations
Internal audits need to be carried out regularly because they can ensure that the company is in compliance with all relevant laws and regulations. If the audit can be carried out successfully and get good results, you will have peace of mind for the next audit. Companies that do not comply with regulations can be subject to expensive fines and have a negative impact on future business. But if an audit is done correctly, it can be an important enabler for any licensing, and gain greater client confidence.
How to choose the best auditors?
Now, we already understand why auditing is important. Thinking about auditing firms is the same as thinking about long-term business partners. Auditors are someone who can be collaborated with year after year, and they can be an important figure for the organization's success. There are several key qualities that organizations should look for when choosing an auditing firm:
- A solid reputation
The reputation of auditors must be taken into account, because of how many companies they have dealt with, whether there have been positive results from the companies they have collaborated with. Even though there is no guarantee that the auditing process will run smoothly, checking the reputation of the auditory firm will provide security and reduce skepticism about your audit report.
- The right qualifications
Ensure the auditing firm has carried out training and qualifications, making them certified as proper auditors and showing how they perform assessments according to what your company needs. Certifications such as public accountant, or global licensed are the auditory firms you need.
- Room for negoisations
Look for auditors who can be negotiated with for long-term cooperation. If you pay a short-term auditor at a high price but there is no change for your business, of course you will lose money. To choose a non-permanent auditor, look at auditors who can offer competitive prices, total transparency of assessments, and provide exceptional value.
- Customer service
Auditors must have good communication skills with consumers. Auditors not only communicate with higher ups, but also all staff members needed to analyze data, discuss risk mitigation, and company goals. What companies most hope for is an auditing firm that is friendly, responsive and helpful.
Are you looking for an auditing film that has all the needs for your company? SMEBrother is your answer. Since 2012, SMEBrother has been an extra support for many businesses for SME companies. SME business is challenging, but we as auditory firm can support our clients on all fronts and become a business brother. Our website not only provides important information about how to thrive your business, but also helps you with licensing, finance, and auditing. Immediately visit our website, and let's talk about what we can do to help your SME business.