Many companies are leveraging a financial statement audit to gain more value for their business because, in addition to compliance with Australian laws and regulations, a business stands to gain additional benefits from an independent audit of its financial statements.
Examples of additional value of an audit include:
Having an annual audit adds value to a business as it comes to grips with increasing regulation and financial reporting requirements. Early adoption of good corporate governance through an audit as a business grows assists in developing the foundations for effective business processes and reporting benchmarks.
For an organisation to prosper, it is essential that reliable financial information is prepared. An audit helps protect the interests of stakeholders and provides key decision makers and directors with the confidence that the financial information driving their strategic decisions is accurate and complies with relevant accounting frameworks.
Businesses are able to access the knowledge and expertise of auditors who have significant experience with a wide range of companies and who have seen businesses facing similar issues. Auditors work across multiple industries with experience across local and international organisations which often provides valuable insights into the adoption of best practice business processes.
Improve Internal Controls
During the course of an audit, auditors can provide management with recommendations for improving any potential weaknesses in financial controls identified. If properly designed and implemented by management, these recommendations can lead to a stronger financial structure that reduces the opportunities for fraud and error.
Auditors may report to directors and management on findings associated with structural or operational deficiencies and make recommendations on improvements to internal procedures and processes. These recommendations can result in improved efficiency, productivity, additional revenue, and cost avoidance or reductions.
An audit provides assurance that major tax risks are identified and brought to managements’ attention which assists in minimising the likelihood of filing inappropriate tax returns that could result in unnecessary tax penalties and interest.
Transparency for Investors
Audited financial statements prepared in compliance with accounting standards provide transparency to investors, suppliers and financial institutions on a company’s financial position, and the results of its operations and cash flows. Businesses that have not been subject to external audits may be perceived by financiers as having higher default risk with restrictions placed on their access to credit which may impede expansion. For those considering introducing financial partners or selling their business, the availability of audited financial statements will assist with the due diligence process in any potential transaction.
Platform for Expansion
An audit provides a platform, both financial and non-financial, for businesses to meet future challenges as they grow and develop into more complex organisations. An independent assessment by qualified professionals of an entity’s accounting framework will prevent unforeseen problems, particularly if the business is expanding rapidly or a candidate for stock exchange listing.
With the aim of providing greater transparency and relevance to financial reporting, accounting standards continue to evolve and inevitably become increasingly complex. These changes influence key ratios, in terms of profit margins, debt leverage, operating cashflows and access to additional sources of funding. Auditors design procedures for testing the application of accounting standards and can assist business owners anticipate the implications of upcoming accounting standards to their business.
With the right auditor, companies can leverage an audit to deliver tangible business benefits. For many fast growing companies, a voluntary audit may be an investment worth making.