How do you perform an audit on your business?
Audit. Though the word can conjure up visions of impatient IRS officials and huge tax bills, audits actually cover a much wider range of financial tools for your company. Performing an audit on your business can help ensure that you have the most accurate possible financial picture of your business. This allows you to make more informed decisions to improve your company's bottom line.
But how do you perform one?
We thought you'd never ask.
Check how financial information is passed to accounting. How are incoming bills handled so that you can ensure that everything is paid in a timely manner?
See how records are being kept. Documentation should be kept until at least the end of the accounting period, even if it's only an electronic scan. Don't forget to backup electronic copies!
Identify and review all accounts in the accounting system. This should include all the journals and double check that everything has been transferred to the general journal, as it can help catch errors in the system.
Check policies and security for accounting information. Passwords should be required on all accounting computers, safes or locking filing cabinets used for storing sensitive information and duties spread among multiple employees to reduce the opportunity for theft.
Compare internal and external records. Do the deposits listed in the accounting books match up to the deposits made at the bank? Do the cash register tapes match what was recorded in accounting? Take the time to make sure these sources match up to catch issues early.
Verify that internal paperwork for tax preparation matches the accepted tax returns. Remember that you'll need to keep copies of your tax documents on file for seven years in case of an audit, though digital copies are usually considered acceptable by the IRS.
When you know how audits work, you can quickly see how they can benefit your company by helping you make informed decisions to build your company's future. But that doesn't mean you need to do the entire process yourself while dealing with a busy schedule! At AccountRely, our job is making sure you can focus on running your company, and would be happy to provide audit services to ensure your company's records are accurate. Please feel free to contact our experienced professionals today for more information.