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What is Audit Accounting?

Accounting and Taxes
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So your small business is doing well. You have customers lined up, money flowing in and out of the accounts and your ledgers posting regularly. To make sure it stays that way, it’s time to have someone double-check your books.

Audit accounting is the bookkeeper’s safety net. It simply means checking over a business’ ledgers and accounts to make sure they accurately reflect receipts and expenditures. An audit also studies a business’ organization to identify potential inefficiencies. Audits can be internal or external; that is, performed by in-house accountants or by third-party contractors. Internal auditors generally have an on-going responsibility within the company. External auditors, on the other hand, are contracted on a periodic basis, most often annually, after the year-end financial report is prepared. Most small businesses rely on external audits as a cost-saving measure.

The greatest benefit of an external audit is independence. An external auditor or auditing team is a third party, one that had no hand in posting a business’ ledgers or preparing its financial statements. This means their findings are free of bias, so an entrepreneur can be confident in their report.

Once the audit is complete, the auditing team will prepare a report outlining their findings. Its key feature will be a description of the accuracy of the business’ financial information. Any discrepancies will be noted, as will any suggestions for improving the business’ record keeping system.

No audit can guarantee 100% accuracy. The work hours necessary to fully analyze the entirety of a business’ financial records – even only over a quarterly period – simply aren’t cost effective. A business will usually have too many receipts and bills to go over them all by hand, even by a team of auditors. Instead, auditors usually analyze financial records on a test basis, evaluating the bookkeeping system’s reliability.

Working without a net makes for a great show at the circus, but not a great business strategy. Audit accounting adds a level of confidence in your business records; small business owners who regularly schedule an external audit can trust that their financial records are up-to-date and accurately record the health of their business.

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