What are the benefits of an annual audit?

Auditing is an important step in maintaining your compliance with regulations and ensure governance after your company is incorporated. With good auditing practices, you can achieve many benefits from risks mitigations and enhanced security.

What is a Business Audit?

Business audit is a documented evaluation of whether or not a company’s financial statements are materially correct along with the standards, evidence, and assumptions used to conduct the auditing procedure for the company.

The results of auditing will be written in the audit opinions and auditors of a company usually reports on the following items in a company:

1. Financial Statements

An auditor reports whether or not the financial statements are error-free from material misstatement. Material means the significant damage that will be faced by the company due to a misstatement or missing information. This action will be large enough to impact the auditor’s opinion of the financial statement.

2. Internal Controls

Most business audits require an auditor to assess the effectiveness of the company’s internal control. Internal controls are ‘rules’ that are put in place in the company’s daily operations to allow the company to produce fair and accurate financial statements and prevent theft of assets. If a weakness in any internal control is found, it must be disclosed immediately to avoid any further misstatements.

NOTE: Even though it is true that technology is taking over the business industry, it is not true that all auditing procedures will be automated. Human ingenuity and professionalism judgement still remains a crucial part of auditing for a company!

Why Conduct a Business Audit?

If you are looking to seek confidence that you and your company is meeting its core business goals, internal auditing is essential and would give you a clear vision of how well your company’s internal operation is and where the problem lies if misstatements were to be found.

At the same time, having internal audit can also protect your enterprise against fraud and prevent fraudulent activities such as thefts, unauthorized personnel’s entry into warehouse etc. These will cause overstatements in goods in the company’s record if inventories were to be stolen or damaged.

If you are worried that your company is not following the current laws, regulation and standards that applies to your organization, having internal audit will help reduce the hassle of you having to study all laws and regulations again.

Role of an Auditor

The role of an auditor include:

• Ensuring and watching over your company’s integrity and accountability

• Scrutinising your financial reporting

• Safeguarding your company against frauds, errors, and risks

• Providing objective assurance that your company is adhering to the rules and regulations

All of these helps the company to avoid penalties in any event of arrears, which can amount up as financial losses.

Benefits of Auditing Your Business

Completing an audit shows your company can be trusted and reliable as it shows the company is fulfilling their necessary responsibilities and obligations. There are companies in which their reputations build around how well they manage their assets.

Some of the benefits are:

1. Strong internal controls

Internal audits evaluate your internal control activities, which comprise of:

• Physical control over assets and records

• Proper procedures for Authorization

• Independent internal verification

2. Process Efficiency

Internal audits help to identify gaps in your business operations, procedures and your governance processes while providing appropriate recommendations on how to solve the misstatements.

3. Security

Internal audits review through your business’s cybersecurity environment to check for any vulnerabilities and if they are secured to your security standards. Auditors will provide and recommend on the possible ways to mitigate the issues raised.

Apart from cyber security, physical security is also reviewed on as to how accessible the storage room storing the inventories is. The easier it is to access, the higher the chance of goods and inventory being stolen which is not ideal for the company.

4. Integrity

Internal audits analyse and review your financial statements and verify their accuracy and integrity. Especially in recent times, fraud has been increasingly common, hence the need for audit is extremely necessary to avoid financial losses.

5. Reduced risks

Internal audits consider all the identified risks to your enterprise and analyse whether your risk mitigations are strong. Again, your auditor will identify the gaps and report back to you on the potential ways to go about resolving the issues.

6. Improved compliance

Internal audits check the laws, regulations, and industry standards with which your organisation needs to comply and whether the company is adhering to these guidelines. If there are any issues on compliance, your auditor will have to raise an issue and provide suggestions on how to solve them.

FAQs

How often the Profit and Loss Account as well as the balance sheet of a company need to be audited?Dylan2021-09-22T13:16:05+08:00

The Profit and Loss Account as well as the balance sheet need to be audited annually.

When do I need to appoint an auditor for my company?Dylan2021-09-22T13:15:05+08:00

You should nominate at least one auditor within 3 months after your company is incorporated.

How long is the auditing process?Dylan2021-09-22T13:14:07+08:00

It depends on the capacity and complexity of your business.

Is my company exempted from the audit?Dylan2021-09-22T13:13:11+08:00

If your company is small, as long as it meets 2 out of 3 criteria as below, it is exempted from the audit:

• Total annual revenue is less than or equal to S$ 10mil;
• Total assets less than or equal to S$ 10mil;
• Have less than or 50 employees

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