An Overview of Business Audit
A Business Audit examines all the financial records of your Company at the end of each year to ensure they are accurate. It's a way of making sure you know exactly how much money your Business is earning & how it's earning it. In other words, it refers to more organised & independent scrutiny of an Organisation’s business necessary papers, accounts, books, and vouchers to determine the validity & authenticity of the organisation's financial statement. Moreover, the process also aims to make sure a universal phenomenon in the corporate & public sector that academics started identifying an Audit Society.
If you are a business owner, you might feel daunted at the thought of your 1st Audit. But, it does not need to be stressful and if done correctly. It can be beneficial for your Business. You can contact Corpbiz, our experts will provide end-to-end solutions for filing Business Audits. Corpbiz’s Audit Services can help you with a comprehensive, professional approach to company auditing that yields practical solutions, not complicated reports. Our experts & services always focus on bring value-presenting you the insight & foresight across your Business to manage the future head-on.
Importance of Company Audit
It is important as it presents the true picture of the state of affairs of an entity. It helps understand & assess risks and evaluates the internal checks & controls. Moreover, it also ensures the maximum utilisation of the available resources along with the timely identification of liabilities, including contingent ones.
Benefits of Business Audit for Your Company
Most business owners are intimated at the thought of an Audit, but an Audit can help your Business to be more dynamic & plan better for the future. Following are some benefits of Business Audits:
- If you are looking to raise capital for your Business, having audited financial statements can increase the confidence of investors & lenders in your Company.
- Certain certifications like ISO 9001 Certification require regular business audits and these Certifications can increase business revenue & lower operating costs.
- Business Audit can also help you to identify fraudulent, employee theft & operating inefficiencies.
- Audits can motivate you to implement new accounting processes also. If your Auditor is not able to get a clear view of your records, then they can help you improve records for the next Audit. You can learn how to use accounting software to prevent incomplete & disorganised records.
- Many business owners in India rely on financial statements to guide their business decisions. But what if the number used to create the reports is incorrect? By verifying the accuracy of your financial records & finding errors, an audit can help straighten out your finances so you can make good decisions.
Different Types of Business Audits
Mainly there are 3 types of Business Audits and you can check the same below:
- Internal Audit: This type of Audit is a self-audit that is conducted & scheduled by a representative of your own Company. Many Businesses in India conduct an Internal Audit once in a year to make sure the accuracy of the Books & Financial Statements. These types of Business Audits are for your own purpose; you don't submit the results to an external organisation. Big Companies generally have Audit Departments, but a smaller business might employ just 1 or 2 people to conduct audits. Internal Auditors do not just check the finances of the Business; they also check Company processes, policies & procedures to check compliance with internal guidance & Central, State & Local Laws.
Public Companies usually conduct Internal Audits to update investors & shareholders on how a Company is performing. Even if you are not a Public Limited Company, these types of Audits can be a vital way to identify operational issues.
- External Audit: This type of Audit, also known as an Independent Audit, is an Audit that is conducted by someone outside the organisation. This is known as Independent Audit because the Auditor has no responsibility to the Business that could create a conflict of interest. Generally, Businesses conduct independent External Audits to comply with some types of legal requirements. The external Auditor will provide you with a report that follows usually accepted accounting principles. In their report, they will have to provide an opinion as to whether your Company paused the Audit. An Auditor might take one of the following stances in a Business Audit:
- Adverse Opinion: The Auditor found that the financial records of a Business materially misrepresent the financial position of the Company.
- Opinion Disclaimer: In this, the Auditor does not give any opinion on certain financial records.
- Clear Opinion: The books and financial statements of the Business correctly represent the position of the Company.
- Qualified Opinion: The Auditor disagrees with some parts of the financial records of the Company, but the Audit was too limited in scope/access to come to a definite conclusion.
- IRS Audit: This occurs only when the IRS finds potential errors in your tax returns. Generally, the IRS schedules audits for tax returns that were filed in the last 3 years. For substantial errors, the IRS might go further back. Various factors can trigger an IRS Audit. If you take numerous deductions, claim losses for multiple years in a row or report high-income levels, these are all risk factors for an IRS Audit. If you choose this Audit, you will be notified in writing. There are 2 different types of IRS Audits as Correspondence & Field Audits.
How Does a Company Appoint an Auditor?
The appointment of an Auditor in a Company is compulsory for the Annual General Meeting. He or she must be appointed every year. The Auditors in a Company appointed at the Annual General Meeting must hold the office from the conclusion of the Current Annual Meeting at which their appointment took place till the conclusion of the next meeting of the Company’s Board.
You can access that Auditor's Appointment is not in the hands of the Directors of the Company. Such powers are always vested in the general body of the Shareholders. However, the Auditors for Business Inspection must be appointed by the BODs or Board of Directors for the 1st time. Their appointment must occur within 1 month from the Business Incorporation date with the Ministry of Corporate Affairs. The appointed Auditor must hold the office until the conclusion of the 1st Annual General Meeting of the registered Business. In any instance, if the Board of Directors fails to appoint its 1st Auditor, then the Company must appoint them at the General Meeting.
Who can act as an Auditor of a Registered Business?
The following entities can act as an Auditor of a Registered Business:
Eligibility Criteria for Filing Business Audit in India
There are no eligibility criteria for getting our Auditing services for your Business in India. However, for Business Audit in an informed manner, we require you to:
- Provide us access as per necessity;
- Make sure that your companies are met;
- Be upfront about your transactions.
Vital Necessary Papers Required for Filing Business Audit in India
Every registered Company in India must file the following necessary papers along with the details of the Auditing with the Ministry of Corporate Affairs to further its claim of successful legal functioning:
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Process for Filing Business Audit in India
Following is the process we implement to provide Business Audits in India: