The scope of internal auditing is broad and may involve the efficiency of operations, IT controls, the reliability of financial reporting, deterring and detecting fraud, and compliance with laws and regulations. For most small to medium-sized companies, an internal audit is the only kind of financial assessment that is necessary on a regular basis unless problematic issues arise. However, some business leaders advocate for the benefits of an external audit for small, family-owned companies, too.
Independent audit gives credibility which is a key to the success of a small business, especially when you are in the process of trying to build a strong reputation within an industry.
Since external auditors do not work directly for your company, they are not going to be swayed by any pressure that you may use to get a favourable audit.
The approval of financial statements by an external auditor is more credible than those of an internal auditor. External audit allows a critique of internal processes.
Internal auditors cannot effectively critique the internal processes of a company because they are part of the company. External auditors, however, have the ability to observe operations and determine which areas of the business are wasting time and money. Most external auditors often critique general operations and accounting practices.
They also develop action plans for businesses to reduce waste and implement strategies for better and greater efficiency. Independent external audits are important because, in several instances, internal auditors may be too close to the business because of their position in the organisation. Some do not have enough accounting knowledge and experience to properly or correctly do the audit financial statements.
External auditors look at the same factors that internal auditors look into and they double-check their work.
They try to ensure that the internal audit was accurate, comprehensive and reflective of the financial status of the company and its tax compliance. External auditors usually have expertise in various financial areas and exceed the knowledge of internal auditors. They may train internal auditors in accounting principles by explaining how they analyse information and how their analysis differs from them.
Internal audit is important for an organisation but external audit increases the opportunities for uncovering potential compliance risks. External auditors and the organisation being audited work together and try to ensure that coding is correct and that guidelines are followed.
Presentation of audited accounts to the bank when organising finance can often carry more weight to your application as it provides some extra certainty to the bank about your financial position and the processes implemented in your business.
Process Improvement — even if nothing unusual is found as part of the external audit process, having an external audit can help to find areas in your business where your internal controls can be improved or where certain processes can be automated or streamlined. An external audit can give you that peace of mind that your business is on track in relation to the financial and administrative processes. Speak to one of the advisers from your local office and see how an external audit can help your business.
Skip to content Home News Six reasons your business needs an external audit. Melissa assists primarily small and mid sized businesses with all aspects of their accounting, tax and audit. She has a particular focus on business valuations and self managed superannuation funds, helping businesses, as well as professionals and investors, to achieve their long-term goals.
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