Business Audit

A 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 audit.

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Types of Small Business Audits

An IRS audit might be the type that business owners are most familiar with, but it’s not the only type of audit.You should be familiar with three main types of business audits:

Internal Audit

External Audit

IRS Audit

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What is a business audit?

The results are reported in a written audit opinion, and the language in the opinion defines an audit.

Financial statements

Regulatory requirements

Internal controls

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Business Audit Benefits

Most small business owners are intimidated at the thought of an audit, but an audit can actually help your business to be more productive and plan better for the future.

Send a signal to investors and lenders

If you’re looking to raise capital for your business, having audited financial statements can boost confidence of investors and lenders in your company.

Root out productivity killers

Doing an audit can help you spot fraud, employee theft, and operating inefficiencies. In turn, that can help you to achieve profitability or increase your profit margin.

Make tax time easier

If you’ve self-audited your financial statements, filing small business taxes at year end will be a breeze. You also make things easier for your accountant, and save on the money that you have to pay them.

Receive certifications

Certain business certifications, like ISO 9001 certification, require regular business audits. These certifications can increase business revenue and lower operating costs.

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Business Audits Image Description

  • An internal audit is a self-audit that’s scheduled and conducted by a representative of your own company.
  • Many businesses do an internal audit once per year to ensure the accuracy of their books and financial statements.
  • An internal audit is for your own purposes; you don’t submit the results to an external organization.
  • Public companies generally conduct internal audits to update shareholders and investors on how a company is performing.
  • The external auditor will provide you with an audit report that follows generally accepted accounting principles.
  • In their report, they’ll have to provide an opinion as to whether your company passed the audit.
  • Following stances in a business audit:-
    1. Clean opinion
    2. Qualified opinion
    3. Adverse opinion
    4. Disclaimer of opinion
  • An IRS audit occurs when the IRS finds potential errors in your tax return.
  • IRS schedules audits for tax returns that were filed in the last three years.
  • Several factors can trigger an IRS audit.
  • If you take several deductions, claim losses for multiple years in a row, or report high income levels, these are all risk factors for an IRS audit.