How to Conduct a Financial Audit for Your Business

 

Financial audits dig deep into the company’s financial situation, investigate accounting records, internal control policies, cash and other sensitive financial areas. Publicly listed companies are regularly subject to external financial audits and even privately owned small businesses may be subject to external financial audits by Deller or other public authority. Knowing how to conduct a financial audit on your own accounts can help you prepare for a possible external audit, keep your accounting system in order and discourage internal fraud and theft.

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Corporate tax and audit

1. Review the systems introduced to transfer financial information to the accounting department.

The first step in the accounting cycle is to collect financial documentation, such as sales receipts, invoices and bank statements, and forward it to the accounting department for processing. Without timely and reliable information, accounting items can become unreliable, creating inconsistencies in the company’s financial statements.

 

2. Look at the company’s accounting policies and controls to ensure that the archives are properly stored.

Small businesses should at least keep an electronic photocopy of cassette tapes, canceled checks, invoices and other financial documentation until the end of the current accounting period. Make sure to quickly access archived records to address any potential issues.

 

3. Identify and review each item in the company’s accounting system, journal entries, ledger and current financial statements.

Systematically work through the accounting system to ensure that all necessary accounts are present, accounts are addressed to the Director-General in a timely manner, and that the system is able to correct human error, such as arithmetic errors.

 

4. Check your company’s internal control policies to measure the level of protection they provide from theft and fraud.

Internal control policies include things like separation of accounting tasks between different employees, locked safes to keep pending bank deposits, and password protected accounting software that tracks exactly who does what and when.

 

5. Compare internal cash inventory records, income and expenses to external items.

Check out the company’s stored external records and compare selected transactions to internal records. Compare purchase receipts sent from vendors for a specific month against internal purchase registers, for example, or compare cash strip strips against revenue entered in the accounts.

 

6. Analyze the company’s internal tax records and official tax returns.

Tax statements must be kept for five years in order to be on the safe side. Review the company’s tax revenue from SKAT and compare it with tax liability records and taxes paid in the company’s accounts. Take some extra time to review the amount of credits and deductions required on the latest return and look for areas of questionable reporting such as. inflated cost numbers.

 

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