When Your Company Will Undergo an Audit

Written by Wall Street News on May 3, 2019. Posted in Continuous monitoring and evaluation of controls t, Evaluation of the underlying processes systems and, Prioritization of risks

A company is a large, professional entity that will both earn and spend money during its operation. No matter its size, a company needs risk management assessment, prioritization of risks, supply chain management, and more to keep its finances and activities safe. Whether a company is a small game shop, a large department store, or a massive international shipping corporation, internal audit outsourcing may be necessary to get all finances in line. Auditing is an essential job to perform on any company, and sometimes this labor is best left to professionals who can be hired for that work. Internal audits can only do so much; a manager may choose internal audit outsourcing if an audit calls for expertise in the auditor. What is there to know about internal audit outsourcing? Why might internal audit outsourcing be necessary?

Auditing as the Business Grows

An audit, for those not aware, is when professional services examine and record all aspects of a company’s (or a wealthy person’s) finances to get a clear picture of it all. It is certainly more complex than that in practice, but that is the general concept. To elaborate, when a company undergoes an audit, auditors will look over all sources of income that the company has and how much it earns, and how much money that company spends (and on what). Not only will actual money be concerned, but less-liquid assets such as vehicles, buildings, computers, warehouses, and more will also be factored in to this auditing work. These items have financial value and may represent assets or liabilities, and the total value may be quite high. All of this together results in a total audit of a company’s worth and financial status.

A young, small company may have very little need for an audit, especially if its business is very narrow in purpose. Meanwhile, as a company grows, its income and spending alike may increase, and it may have more and high-value assets to its name. A growing company may also start to diversity, dealing with a wider range of products and services and to more and more markets and clients. As the company becomes more complex, in-house talent may be strained to keep track of all financial information. A company may be making much more or less money than the employees realize, and some assets or business functions may be a bigger risk or problem than they realize. In short, this work may become too messy for internal talent to handle. Thus, internal audit outsourcing may be done, and a manager will reach out to dedicated auditing services. For a fee, these services will send professionals who can expertly assess a company’s financial status and assets. There are many benefits to this.

Benefits of Auditing

Auditing is hardly done on a whim. Rather, a company may undergo an audit if the business tax season is drawing near and a manager or owner is unsure of the company’s gross profits or liabilities. Paying far too much or too little on business taxes could be a real problem, so internal audit outsourcing may be done so that the manager knows how to handle the tax work. What is more, even the job of paying business taxes may be outsourced to specialized firms. Internal bookkeeping is standard, but paying those taxes may be handled by another party. To put it concisely: internal audit outsourcing allows a manager to figure out what is owed, and tax firms will handle the tax payment itself to the IRS. For large and diverse companies, these outsourced forms of labor may save a lot of hassle and trouble.

A company may also undergo an audit if it has declared bankruptcy and is seeking debt relief in a court of law. The debtor company will be asked to create and present a reorganization plan, and bankruptcy lawyers and internal audit outsourcing alike may help make this possible. In other cases, auditing may be done if white collar crimes such as embezzlement or stock broker fraud are suspected. Such crime may cost the company and its clients or partners a lot of money unless the criminal party is soon found. An internal audit may be just the right way to do that.

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