Business owners typically aren’t thrilled to be audited. But, genuinely, audits can be a welcomed, useful tool that establishes confidence in your business — from you, staff, lenders, vendors, investors, and more.
We aren’t talking about a CRA audit. We’re talking about an independent audit, which you can trigger at your own pace. This guide will explain what an independent audit is, why they’re useful, when to get one, and how to prepare for it.
What exactly is an independent audit?
An independent audit means getting a third party to scrutinize your business’s financial records and reporting policies, to ensure their integrity. This third party, called an auditor, is typically a Chartered Professional Accountant (CPA) or a public accounting firm.
The auditor will check your business’s financial documents, analyze your operations and policies, evaluate your assets, determine your tax liability, and confirm your compliance with laws.
Shareholders, investors, and vendors are keenly interested in audits because they expose fraudulent practices or misleading financial claims. If the audit results come back clean, people put more trust in the business. Furthermore, the very concept of audits keeps business owners on their best behaviour.
Why can’t you audit yourself or task your in-house accountant?
While you should certainly build the habit of examining your financial records, audits are more formal, and the results are used as objective proof. Hence, it would be a conflict of interest for you or your staff to audit your own business, as there would be bias and a motive to alter the results — which is less trustworthy from an outside perspective.
The biggest reasons you need an independent audit
Unlike a CRA audit, you’ll make the choice to start an independent audit because you’ll benefit from it.
To raise capital or sell your business, use internal audit results to give potential buyers and investors the full rundown of your business in an objective and unbiased format. This is super impactful for gaining trust that eventually leads to closing a deal.
To leverage supplier relationships (aiming to place larger orders, increase your trade credits, etc.), use internal audit results to confidently display that your business is in a great state to honor the mutually beneficial arrangement.
To meet lender/investor requirements, use internal audit results to expedite their vetting processes by providing info that has already been verified by a reputable third party.
To gain the trust of your audience and potential clients, complete and internal audit in order to assure people your business has been thoroughly reviewed and declared up to par.
To go public with stock for your business, you’ll need at least three years of audited financial statements.
Independent audits are a weapon at your disposal for dealings with banks, venture investors, sellers and clients. Contact us today and share your circumstances to learn exactly how you can turn an independent audit into growth for your business.
Then, tip the scales in your favour by preparing for and initiating the independent audit — you’ll learn exactly how in the next guide.
