Company audit | How to register | Registration services 2020
The term audit usually refers to the financial statement audit. An audit is an examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements, as well as non-financial disclosures, present a true and fair view of the concern.
Almost all companies receive a yearly audit of their financial statements, such as the income statement, cash flow statement and balance sheet. Lenders often require the results of an external audit annually as part of their debt covenants. The rules regarding company audit are contained in the Companies Act, 2013.
Under this, it is mandatory that every registered company, irrespective of its nature of business or turnover, must have its annual accounts audited each financial year.
Why audit is important for your business
- An audit of your company gives a clear picture of your accounts and overall financial statement of your company. Doing an audit can help you spot fraud, employee theft, and other inefficiencies. So, the main function of it is to check for accuracy.
- An audit can help you find errors. Consequently, through an audit, you might be able to spot a small mistake before it becomes a big one. Which can help you in improving your accounts and generate more profit and revenue?
- There are certain business certifications that require a mandatory audit of your business like ISO 9001 certification. Further audits are very important for the quality control mechanism and improve your business’s efficiency.
- Audit can motivate you to implement new accounting processes if your auditor is not able to get a clear view of your records then you can improve your records next time.
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Types of Company Audit
- Internal Audit: Internal audits are conducted and initiated by your own company. It is mostly done for the internal matters of the company. This type of audit helps to prevent any financial mistakes and review your company goals.
- External Audit: An external audit is conducted by a third party like the local tax agency, IRS or any insurance company. An external audit, also known as an independent audit, is an audit that’s conducted by someone outside the organization.
- IRS Audit: The IRS (Indian Revenue Service) also routinely performs audits to verify the accuracy of a taxpayer’s return and specific transactions. When the IRS audits a person or company, it usually carries a negative connotation and is seen as evidence of some type of wrongdoing by the taxpayer. However, being selected for an audit is not necessarily indicative of any wrongdoing.