Getting Audit-Ready: How to Prepare Your FinancialsThank you for reading this post, don't forget to subscribe!
The thought of being audited can be intimidating for businesses and individuals alike. However, an orderly preparation process helps ensure you have all the records necessary to support your submitted tax forms, financial statements, and business practices. Follow these proactive steps to breeze through your next audit with confidence:
Collect Relevant Documentation
Gather 3-5 years of records that auditors may request to review. This includes tax returns, bank statements, invoices, receipts, contracts, policies and any other proof sources to substantiate figures. Organize paperwork chronologically and by category into labeled folders for fast look-up.
Standardize Accounting Methods
Ensure your choice of cash vs accrual accounting is applied consistently across reporting periods. Stick to conservative revenue recognition and expense/deduction claiming standards. Keep detailed documentation around key judgments for more complex entries subject to interpretation issues.
Conduct internal spot checks on financial reports, inventory levels, operations compliance, calculations and filing completeness well before outside inspectors. Identify potential red flags early, implement corrections, and determine the most defensible positions.
Inform All Staff
Train employees to follow standardized procedures and retain thorough support records. Make audit protocols and contact personnel clear across the organization. Enable quick turnaround times for auditor inquiries through collective preparation.
Independent audits serve as accountability and improvement mechanisms for businesses. Adopt these proactive preparation tips all year to ensure your company complies with financial reporting standards and passes audit testing with flying colors! Let us know if you need specific advice on adjusting internal controls before your next review.
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