Business owners know the impact of internal audits. Firstly, these inspections help check a company’s accounts to identify issues and develop better strategies for business growth. However, contracting an external auditor is better for modern businesses because they carry out extensive inspections.
External audits, done by an independent agency and are much better. The individuals carrying out the inspection have no connection with the company. Thus, the audit report is not interfered with and delivers accurate results to make better financial decisions.
So if you’re not using an external auditor to monitor the business, independent agencies should be your next choice.
What is An External Audit?
The audit may be voluntary or involuntary (in some cases) and an accountant conducts the audit according to specific industry rules. In case of an external audit, independent agencies or accountants conducts an audit. It means the accountant and every individual working on the inspection have no connection with the company.
The main purpose of these audits is to conduct an independent examination and verify a company’s financial statements. These statements reflect a company’s financial state based on current accounting standards.
The Importance of External Audits
Internal audits are effective but may not reflect a company’s true financial position. After all, a company’s accounting department handles internal audits. So the results may be biased or non-extensive. Below are reasons to employ an external auditor:
Help with Tax Compliance
Tax compliance issues lead to the closure of many businesses today. While keeping up with taxes seems straightforward, company accountants have a huge task. Moreover, inaccurate tax filing can also lead to issues with the authorities. So avoid that, get an external auditor. Besides, the accountant gives an unbiased opinion since they are not afraid of the repercussions since they are independent.
Independent Credibility
Internal auditors are the company’s employees. Unfortunately, this causes them to give biased results since they want to give a good impression. On the other hand, external accountants have no emotional or personal connection with the company. Thus, they give accurate reports, despite the effects of the report on businesses.
For instance, if a business needs to assert its position in the industry, it needs accurate information. The data helps to make the best moves and decisions. Thus, an external auditor’s report is more credible than that given by internal accountants.
External Audits Allow Deep Critique of Company Processes
Companies operate well if all the business processes run properly. An external accountant takes time to observe operations and workers. As a result, they identify issues that affect the company, like those wasting time and money.
External auditors critically examine accounting practices and general operations to develop the best plans. Ultimately, companies reduce money and time wastage, increasing the efficiency of work processes.
Better Quality Control
Company CEOs handle the management aspects alongside their managers. However, they must leave accounting to well-trained individuals who focus on nothing else but accounting issues. Still, leaving accounting to internal auditors leaves room for alteration of results. After all, these auditors have an actual connection with the company. So, they give results that make them look good.
Fortunately, external accounting improves quality control by checking the accuracy of internal audits. At the same time, these accountants truly reflect the company’s status.
Better Financial Reports
Since independent accountants handle accounting issues only, they have more knowledge and experience in handling business auditing. On top of that, these accountants have additional skills, like attention to detail, when checking company accounts.
Thankfully, this expertise helps businesses improve operations and make better financial decisions in the future.
Result Validation
Although internal auditors are not the best to give comprehensive accounting reports for companies, external audits back up their data. So if you need to ascertain that reports are accurate, give the internal auditor’s report to an independent accounting agency. The agencies offer validation for events or situations happening in the company.
Trend Identification
Some trends might seem ordinary for internal accountants. However, getting an external auditor offers a fresh look into financial data. These experts identify trends and provide the necessary information and training to internal auditors. Ultimately, the company team acquires skills to handle information better.
How Long Do External Audits Take?
Audits usually take a few months because external accountants need to do proper planning. Again, these auditors need to do the fieldwork, compile results and give a comprehensive report. Above that, external accountants handle other company audits apart from yours. So they need adequate time to do a proper evaluation for accurate results. These months are split as:
- Four weeks of planning
- Four weeks of fieldwork
- Four weeks of compiling the report
Conclusion
Hire external accountants if you want to make the right business decisions and avoid tax compliance issues. These experts are knowledgeable enough to check the company’s finances and report issues (if any).
