When Is the Right Time for Your Company to Get an Audit?

For many businesses, audits are deemed as being a time-consuming inconvenience, and one that may also cost considerable sums of cash.

However, there are numerous benefits of being the subject of external and internal audits, while well-time audits can also identify key budgeting and spending issues that continue to undermine your business.

This is the reason that reputed companies provide ISO online training to their employees so that regulations set by the authorities are met and if any discrepancies occur, those are handled at the earliest.

We’ll explore these benefits further below, while asking whether now is the right time for your company to get an audit?

What are the Usual Reasons for an Audit?

Before we delve into the timing of your audit, it’s important to consider the main reasons why such a process is required. These include:

• A Request From Venture Investors: In instances where your business is poised to receive investment from venture backers, it’s common for investors to ask for full disclosure of your financial statements. This will require an independent financial audit that’s forensic by nature and covers a period of years.

• Bank-affiliated Audits: While not all banks will mandate an audit of your business financials, some of the larger financial institutions will demand this of large corporations. Once again, this will require an independent audit of your company accounts.

• Vendor Audits: If you intend to sell your company, it’s common practice to arrange an independent and external audit. Not only do virtually all prospective buyers require one, but this can also help to justify the valuation of your business and conform to GAAP regulations.

• Going Public: Also, if you intend to list your business on a stock exchange, you’ll need to submit three years of audited account data. This is a firm prerequisite of going public and making shares in your company available in the marketplace.

Is Now the Time For an Audit?

The reasons above all indicate key motivations for requesting an independent audit, including the receipt of a formal request from a bank, lender or venture capitalist investor.

Maodong Xu explains that you’ll also need to request an audit in instances where you’re selling a business or looking to raise capital (especially through a public stock exchange listing), or if your venture reached up to £2 million in revenue).

The latter point is interesting, as pronounced or rapid growth in your business may place significant pressures on your company infrastructure and accounts reporting process. This can make it hard to verify and analyse your accounts, so a comprehensive internal audit may be required to provide clarity and prepare your reports for external examination.

In the latter instances, of course, it will be you as the business owner to determine when an audit should be carried out, rather than relying on prompts from a bank or investor.

This requires an organised and methodical approach to running your business, along with an understanding of significant changes in revenue and their impact. Above all else, you’ll need to err on the side of caution when considering audits, while carrying out the internal analysis of your accounts on a regular basis can also be incredibly helpful.