Large, faceless corporations are no longer the only ones that need an external auditor.
More than ever, closely held, family-owned businesses and non-profits are seeing the merits of hiring an external auditor to survey their books and validate their financial status.
While you may be satisfied with the internal audits performed by your organization’s staff accountants, it may be impossible to judge their impartiality without the corroboration of a knowledgeable and credible external auditor.
Having a high-quality auditor working on your behalf can help stave off potentially catastrophic problems. Fraud, abuse or non-compliance with government regulations can all be hidden beneath the surface of your day-to-day accounting practices, and can become more pronounced the more your company grows. Here are a few reasons why you might want to partner with an external auditor sooner rather than later:
- Government compliance. An external auditor can help identify areas where your books or accounting practices are no longer in compliance with new Internal Revenue Service regulations. An external audit can also pinpoint where your compliance efforts may be lacking. Since an external auditor has no reason to be anything but honest about the status of your financial compliance, you can rely on the independence of the investigation and on the recommendations being made.
- Credibility. Internally and externally, your financial statements will carry more weight if they’ve been vetted by an external auditor. For family businesses, closely held corporations and non-profits, these audits provide common ground for stakeholders to properly assess the financial health of the organization. For publicly traded companies, external audits offer an unbiased glimpse into the accounting practices of the organization.
- Fraud Prevention. While it may be unpleasant to even think that someone could be defrauding your company, it’s better to know for sure than continually wonder. It’s impossible to spot a fraudster just by looking, and they often turn out to be the person least likely to arouse suspicion. External auditors examine bookkeeping records without the filter of personal relationships clouding their judgment. For them, the financial statements will tell the unvarnished truth, and their impartial inspection could keep your business from taking a major loss.
- Process Improvement. Hopefully, your external audit will turn up nothing unusual. Even in this instance, however, an outside accountant might find areas where you could improve your internal controls or automate certain processes to be more streamlined. While these recommendations don’t have to be implemented immediately, knowing where waste and inefficiency are originating will allow you to put a plan in place to address the problems over time.