Any business, regardless of size, can be subject to an audit of some kind, and it’s no surprise that the financial audit process can be frustrating for SMEs. Auditors are there to do their job, but it’s often hard for them to appreciate your business and its processes as well as you do. And sometimes, audits show inconsistencies, which can potentially lead to civil and criminal allegations. Yet, financial auditing is an effective way for SMEs to address audit inconsistencies, which could potentially lead to civil and criminal allegations. Even with all the pain, there are still steps SMEs can take to reduce audit risk elements. This article provides some insight into how an SME can effectively address audit inconsistencies.
Communicate with your auditor
If you’re a small business owner, you may not have experience with financial statements or audits. During an audit, the auditor will be trying to understand your business. They’ll want to know why sales are where they are, what expenses are going on, and how you make your money. When it comes to communicating with your auditor, the more information you can provide, the better. This includes any changes to your business that could impact the audit, and it’s important as they’ll be able to advise you on how to manage these issues or make sure you’re aware of the risks involved. It is also advisable to give your auditor access to all the relevant information they need, including your latest financial statements and other relevant documents.
Come up with courses of action
An audit presents opportunities to improve efficiency and consistency in the business processes. When inconsistencies show up, this could be due to misunderstandings or lack of instruction on accounting principles and rules. Before your audit report is issued, an effective auditor can help to offer insights and analyse the possible courses of corrective action. To ensure the integrity of your financial statements, it is highly advisable to also include, for every audit inconsistency pinpointed in the report, a proposed corrective action. This will help you get rid of some of the problems and achieve numerical results during your next evaluation so that the auditor considers your corrective action as sufficient.
Commit to your corrective action plan
Corporations must take all necessary steps to ensure those audit inconsistencies are addressed and resolved appropriately. Your company’s response will determine whether or not the auditor sends another notice and whether your company gets another opportunity for correction. In order to clear up the inconsistencies in your audit report, you need to decide on the corrective actions you plan to take and then meticulously implement them. The best way to do this is to keep track of what steps you have taken, the progress you have made, and the achievements you have reached. It would be prudent to document your work and the results for later review by the auditor or in case a legal issue emerges.
If you’re running an SME or any business, it’s probably a matter of time before you encounter audit inconsistencies. Fortunately, there are many ways to address these inconsistencies. It’s important to note that audit inconsistencies are not always a sign of fraud or fraud itself. They can also be the result of a lack of knowledge on behalf of the auditor or an auditee. In any case, it is crucial for businesses to address these issues so they can avoid the unnecessary costs incurred by their auditors and other parties involved in the auditing process.
AG Singapore is an accounting firm in Singapore that provides affordable accounting services to small and medium enterprises (SMEs). We offer a range of services to help small businesses prepare and keep track of their financial records, as well as stay on top of their account management process. Our commitment is to make sure all our clients are properly informed of the audit process so they are able to fully appreciate the benefits of our services. Reach out to us today to learn more about how we can help you.