The Ultimate Guide to a Successful Financial Audit

Managing a freelancer job is an exhausting task of its own.  Taking on all of the finances is just added responsibility.  A financial audit is something that can make anyone with a non-financial background shudder.

That being said, it is also a necessary evil.  Such a financial, business review enhances the reliability and credibility of a company for stakeholders such as banks, government agencies and shareholders.

It is a legal requirement of listed companies to ensure regular audits are done. It is advisable for independent companies and freelance workers to undergo annual audits as well!  In fact, business growth for freelance workers is highly dependent on annual financial “audits.”

Thus, audits as self-assessments play a key role in making or breaking the financial strength of a business.

What is a Financial Audit?

A financial audit refers to the systemic analysis and evaluation of the financial statements and related documents of a company.  Usually, a company goes through the process of a financial audit at the end of the year.  It is an assessment of the financial status of an organization and involves the careful consideration of accounting practices, internal as well as external controls, and other financial aspects.

The audit report helps in determining whether current accounting practices are sufficient for proper bookkeeping or if there is a need to change financial strategies.

This eliminates any chance of fraud or embezzlement of funds.  When choosing auditors, make sure that they are not a stakeholder in your company.

Types of Financial Audits

In order to conduct a fair and transparent audit, companies carry out two types of financial audits.  These include internal and external audits.  Internal audits are concerned with the economic growth of a company.

They focus on the growth, sustainability and outlook of the company.  In contrast, for external audits, management usually hires auditors outside of the organization that are unrelated to the business in any way.

External audits usually serve as a reassurance to stakeholders of the honesty and reliability of the organization.  In general, external audits are geared towards larger companies, whereas companies of all sizes can benefit from internal audits.

When it comes to freelance workers, conducting a financial audit is never easy.  It is a dry task and can be nerve-wracking at times.  Thus, it is strongly advocated to hire an accountant consultant for freelance workers to get the job done efficiently.  The following is a comprehensive guide to help you with conducting a successful financial audit at the end of the fiscal year.

• Plan your Audit

  
  

An audit is bound to be of no use if you are wholly unprepared or clueless about it.  Since a financial audit is an annual event that takes place at the end of the fiscal year, you would have plenty of time to prepare for it.  It is up to the auditor to set specific goals – the expectations and resulting conclusions of which define the audit.

Preparing in advance will help in dealing with any complications that might arise.  The purpose of a financial audit is to find the ‘sweet spots’ where the business’ practices are lacking.

Changes are bound to occur after a thorough audit.  Preparing for the audit ensures you are ready to embrace the resulting changes and the smooth functioning of the organization during their subsequent implementation.

When preparing for the audit, approach it as an elaborate process.

Accountant consultants for freelance workers suggest that even small changes, like updated schedules and well-kept reconciliations in day-to-day tasks, can reflect humongous progress in annual audits.

• Consider previous Audit Reports

It is always a great idea to learn from past mistakes.  When preparing for this year’s audit, keep all of the reports from previous years handy.  This will help you analyze what strategies had worked for the organization and what didn’t, such that it’s easier to choose the appropriate game plan for the current year.

Also, consider the fact that markets change gradually over time, so don’t be entirely dependent on previous reports when using them as a reference manual.

After analyzing past issues, make sure they are mentioned in your internal report in order to convey to affected departments to act accordingly.  Effective communication is a key feature of making an audit successful.

• Stay updated

Consider current accounting standards that are prevalent in your market.  Make sure that your organization is following state-of-the-art accounting strategies and procedures.

The accounting consultants for freelance workers must be aware of any legislative regulations that affect the company’s operations and policies.  Accounting works in coordination with tax laws (https://www.law.cornell.edu/wex/income_tax): any changes made in the law must be reflected in the company to prevent possibly catastrophic mishaps.

• Evaluate Tax Returns

  
  

The tax return is a significant financial aspect of any organization.  Poor financial management can result in tax liabilities and their carryforward, which is just not suitable for the company’s hard-earned image.

If you are consistently keeping up with tax filings, on the other hand, it is important to go through them thoroughly in order to gain insight into the financial growth of the company.

Accountants for freelance workers, small-scale businesses or for multinational companies – irrespective of the business scale, good accountants suggest careful consideration of tax records from the previous seven years in order to effectively study growth patterns.  Every organization keeps track of their tax records but if you are a freelancer, you can get a hold of these documents from the IRS as well.

• Compilation of the internal Audit Report

After a thorough study of your company’s accounting practices, tax returns, and previous audit reports, analyze the facts and figures explored in order to compile your final, internal report.  One way to do so is to segregate data into different classes such as payables and expenses, cash, fixed assets, revenue and receivables, and long-term debts.  This will help when comparing data, looking for discrepancies, and it will guide you in coming up with appropriate strategies to stimulate further financial growth.

No matter what you do, there is no escape from audits, be they for external or internal purposes.  However, you can always prepare for them and hire an accountant consultant for freelance workers to get you through the process smoothly.

Well, thanks for reading.  Have a great day ahead and please remember, sharing is caring!