How to Prepare and Be Ready for an Audit? – 3 Simple Steps
Tags – Preparing for an Audit
The notion of facing an audit may not be pleasant. However, with the right preparation, the process of auditing your business by an independent auditor will move more swiftly than you would have initially expected.
Here are the steps you need to take:
1. Request a PBC in Advance
In line with the auditing procedure, you will receive a prepared-by-client (PBC) list prior to the actual audit, enlisting all the requirements of the auditor. However, you may not know this, but you can request a PBC in advance. And, given that this list is usually quite extensive, covering everything from bank statements to inventory records, requesting a PBC early will allow you more time to prepare for the audit, instead of waiting for the period right after filing your tax papers.
As you can imagine, a PBC will have quite a few similarities with your year-end statements, meaning that you may be able to fulfil two requirements in a single move.
2. Keep Financial Records Up to Date
This suggestion is quite trivial: Instead of treating your business finances as an activity for the end of the year, you need to keep it up to date all year round.
Here, you have the option to either use a software that will easily keep track of your business finances or you may outsource it to a professional accountant. With both these options, we suggest that you keep your records digital. Digital accounts are not only easier in terms of preparation, but also allow more effective categorisation and reshuffling where required, along with an ease of tracking and maintenance.
Going a step forward, you also need to perform reconciliations all year around, making sure that your internal financial records match third party valuations. At the very least, these reconciliations should be performed on a quarterly basis. Doing so will allow you to fix any issues in time, instead of scampering at the point of getting audited. Same can be said for any other incompleteness or corrections required for your records.
3. Ask Questions
You should be well informed about your rights to ask questions.
Sadly, there is a negative connotation with the notion of being audited. However, especially for bigger businesses, getting audited is a part and parcel of your business life. This means that audits are far lenient than you would have ever imagined and therefore, you should ask questions.
For instance, if you are unclear about anything on the PBC list, take your time and get back to auditors and clarify.
In fact, most auditors are glad to clarify matters at this stage, instead of having to come back to fix any problems.
To learn more and to find out about how we can help with your auditing processes, please feel free to get in touch.
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