Every business needs to perform a financial audit regularly. But what are the vital elements of this kind of audit? If you own a business, you need to know. Here is a look at five critical components every financial audit should contain.
What Is a Financial Audit?
A financial audit usually occurs annually. It probes your company’s financial position by investigating your business’s financial statements and processes. Additionally, auditors examine accompanying documentation.
The audit can include looking at your accounting records and your internal control policies. Additionally, auditors check that your accounts are following industry standards.
With a financial audit, your stakeholders and others associated with your business can view your company’s financial position. This gives them reassurance. Additionally, it ensures that your company complies with regulatory practices and has protection from fraudulent activities.
To ensure your audit has professional scrutiny at every level, you need a certified accountant or auditor to look over your books. Certified public accountants have passed the demanding CPA exam. Therefore, you can be sure they have the necessary skills and experience required for conducting a financial audit.
However, the examination is no easy test to pass. For example, only 46.37% of people pass the Auditing and Attestation section of the exam.
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Component #1: Preparation for a Financial Audit
The first critical component of a financial audit is the preparation you’ll need to do.
First, you need to tell your auditor whether he or she needs to perform an audit of only your