Why having an external audit done on your company may seem like a costly and unnecessary exercise, there is immense value in having this process done.
Says Octagon Chartered Accountants: “A good audit does so much more than produce a set of financial numbers. An audit means that the business critical processes are reviewed by the auditor for shortcoming and these are pointed out to you.”
While you may think that your business is flawless and has a pristine track record, having an external audit done will verify whether this is the case, or whether or not your company is falling short of its perceived reputation.
“In addition,” explains Octagon, “an audit assesses your risk concerning laws and regulations, SARS compliance risk, off-balance sheet risks such as over reliance on one or few debtors, unsecured supply agreements, going-concern risk”.
In many cases, adds the auditing and tax advisory firm, if some of these risks are not addressed, it may mean that your business, although profitable for a few years, will be hit with a curveball and will be forced to downsize or close down.
The question is how does one begin the process of hiring an external auditing firm?
There are a couple of considerations that a company should keep in mind when beginning the hiring process, says Octagon. These include looking at the auditing firms:
- Average client retention period
- Staff retention – there is nothing worse for a client than dealing with new staff on a continual basis
- Knowledge of your industry
- Qualifications of staff within the audit firm. Are there competent non-partners within the firm who can assist you when the partner is not available?
- Has the firm passed ISQC quality control standards as mandated by IRBA?This ensures that the firm applies the latest quality processes relating to all aspects of the running of the practice
- Is the fit between your business and the audit firm the right one?
- Is the auditor able to add value to your business?
- Company data backup procedures – is your confidential data safe and secure?
Once you have confidently hired the firm of your choosing, you will find out whether or not your company is in fact in good standing as you once though. If, however, discrepancies arise, a report will be drafted and presented to the company. From here, you can then put steps and procedures in place in order to rectify these problems and ensure that your company remains a healthy one.
When asked whether there was any advice for companies who haven’t followed standard accounting procedures, Octagon says that there is no magic formula or shortcut. “Weak accounting systems that lack management oversight, segregation of duties and that are not performed regularly leave your business exposed to fraud and error.”
Commitment from top management towards good governance permeates through the whole company, and helps to prevent incidents of fraud within your business, explains Octagon.