Date of Posting : June 28, 2020
Year-end brings with it not just excitement and celebrations, but also the responsibility to complete financial audits. Maintaining proper accounting records is a key aspect of any company’s financial reporting. So here’s a quick guide to help you understand all that you wanted to know about year-end audits.
Preparing for a Year-end Audit
A year-end accounting audit is a procedure of examining a company’s financial situation in its entirety. It’s done to ensure that the company complies with the pertaining laws and accounting standards. Preparing for year-end audit in advance will make sure that the process goes smoothly. Basic auditing can help you ensure a trouble-free year-end audit that can prevent an audit from the IRS as well as keep you safe from legal issues arising from faulty or fraudulent accounting information.
Information collection and retrieval
Every business must collect financial information reliably and store it in a secure manner. From bank statements to invoices and canceled checks, everything must be organized and kept in separate files and folders for quick retrieval, as and when needed. Care should be taken to keep relevant and related documents at the same place. This process also helps in resolving any issues or answering any queries of the shareholders or the IRS, if the need arises. It is also helpful in judging the financial situation of the business and improving it.
Keep a check on the company’s internal accounting controls
Securing the confidential accounting information is one of the most important aspects of auditing. With adequate internal accounting controls, protection against theft and fraud is assured. Keep accounting personnel separate and, if possible, assign different accounting duties to different employees. Keep the safes locked all the times and accounting systems password protected with restricted access. Another important internal control is to install surveillance cameras and systems for understanding who accessed what information and when.
Compare records regularly
A beneficial accounting practice is to compare internal records with external records to ensure their credibility. By doing so, you can assure that your company’s accounting records are accurate and this could ease the year-end audit tremendously. Any errors can be rectified in time and your company’s reputation could be saved.
Create an audit report
Once you have maintained proper records, an audit report must be prepared to summarize the financial position of the company, to assess the accounting system, and to highlight business departments that are performing well. This document will help a great deal for future use and can become handy in case the IRS audits your business.
Auditing your company’s financial statements should be a regular activity as it helps in ascertaining the profitability of the business and is one of the key requirements of lenders, investors and creditors. And when it comes to a year-end audit, it should never be looked at as an ordeal. There is no denying that a year-end audit involves a lot of hard work, but it is highly beneficial to understand your company’s past accounting procedures, improve them and plan ahead for better financial health. Just prepare for the audit all year round by following best practices and welcome the new year without any worries.