A business audit is essentially an internal or external investigation into the different components of your business. Once an accurate audit report is produced, the information can be used in beneficial ways to make effective changes in key areas of your business that can improve efficiency and financial growth. We explain 11 different types of business audits so that you can confidently have your small business externally audited or internally perform necessary audits so that your business can enjoy the benefits. SureBooks accounting services are offered by professional accountants that can expertly assist you with all your financial business audits.
11 Different Types of Business Audits:
We understand that mentioning the word “audit” to a small business owner can create stress. Small business owners usually find business audits overwhelming and avoid doing them due to the negative associations. Audits have a misconception that they are bad for your business when in reality many business audits can be highly beneficial.
Business audits are highly beneficial for improving the operation, performance, and compliance of your business. Audits allow you to be fully aware of everything going on in your business which can enable you to pick up any problematic areas, fraudulent behaviours, or inadequate accounting practices and find solutions. The different types of business audits allow you to operate at optimal efficiency and ensure the ongoing success of your business.
Audits can be performed internally, externally, or both. A business audit can focus on finances, compliance, information systems, payroll, and many other factors that allow your small business to operate successfully. We highlight the 11 business audits that your business may need to perform to ensure compliance, optimal operational efficiency, and improve your business’s financial health.
1) Internal Audit:
An internal audit is simply an audit that is performed within the business. As a small business owner, you can perform audits yourself or you can have selected employees perform relevant audits on your business. Internal audits are performed to provide you with a clear understanding of all the components of your business and allow you to keep organised.
Internal audits are beneficial to your business as they assist you with understanding the performance of operations, evaluate risks in your business, pick up on any problems occurring within your business, and make informed decisions about the next actions to take for your small business. Internal audits do not replace external audits performed by standardised auditing companies, but are often used by external auditors as a comparison for their reports.
2) External Audit:
External audits are performed by a third-party auditor or auditing company. You can either request an external audit to be performed on your business or an external auditor can inform you that an audit is going to be performed on your business. An external audit can therefore be performed on your business without your consent, with the most common external audit example being a tax audit.
External audits are beneficial as they are done by an independent and objective auditor. The audit reports produced will be professional, compliant with auditing standards, and will be a reliable audit report for external parties. External auditors also generally have your business’s best interests in mind as they strive to ensure you are fully compliant. An external auditor can also pick up on problematic areas your internal audit may have missed, and thus assist you in making improvements in your small business.
3) Tax Audit:
A tax audit is performed externally by SARS and is an extensive examination of your financial records and supporting documentation to ensure tax compliance. Your small business can be selected at random for a tax audit or your small business can be selected based on being determined as high risk by SARS. Late tax return submissions, inaccuracies in your tax return, or suspicious deductions in your tax return can alert SARS to your small business. To find out more about the full tax audit process for small businesses, read our article Small Business Accountant: Be Prepared for Your Business Tax Audit.
4) Forensic Audit:
A forensic audit is an audit worthy of being fearful of. A forensic audit is performed by highly professional technical auditors that use both accounting and investigative procedures to audit your business. Your small business will usually experience this external audit if your business is suspected of criminal activities, such as fraud, or if there is a disagreement between business owners.
5) Financial Audit:
A financial audit is focused purely on the finances of your business and can be performed internally, but is usually performed by an external auditor for objectivity and reliability purposes. A financial audit will analyse whether your small business’s financial statements are accurate by reviewing your transactions, expenses, income, assets, investments, and other financial aspects of your business.
A financial audit is highly beneficial for your business as it provides you with a clear report on the financial health of your business. You can then use this audit report to acquire additional funding for your business expansion. If you ever wish to sell your small business, you can use a financial audit as a demonstration of the financial status of your business.
6) Compliance Audit:
A compliance audit is performed both internally and externally. An internal compliance audit can be done to ensure all aspects of the small business comply with the set business standards. An external compliance audit will ensure that the business is compliant with standard business regulations and governmental laws. A compliance audit that demonstrates your business is completely compliant will ensure that you can continue operations.
7) Operational Audit:
Operational audits are performed internally and will evaluate your small business’s procedures, policies, operational productivity, and operational goals. An operational audit is highly beneficial as you can pick up any inefficiencies or costly operations. You can then use to operational audit to make the necessary improvements to operate at a successful rate.
8) Payroll Audit:
A payroll audit is done to verify the information in your payroll. The payroll audit will assess payroll processes and reports for accurate PAYE, that employee wages match the hours your employees have done in your business, and confirm all employee information is correct, such as their banking details, residential details, and contact information. A payroll audit is generally done annually and can be done either internally or externally.
9) Information System Audit:
An information system audit is an audit performed on your small business’s information technology infrastructure. An information system audit will ensure that your information system is working efficiently, is safeguarding your data and assets from malware, and is maintaining the integrity of your data. An information system audit is highly beneficial as it can ensure that your data or your client’s data is being protected and provide you with insights into better management systems.
Your information system will be complex and personalised to your business to safely store your data. It is generally advised to have an experienced external information system auditor perform this audit, but if you have an employee qualified to perform an information system audit then you can perform this audit internally.
10) Pay Audit:
A pay audit is done by an external auditor to assess the pay data of your small business. The external auditor will analyse whether there are discrepancies in pay based on age, gender, race, or religious affiliation. A pay audit will also pick up if there are any major gaps in pay between employees in similar positions based on connection to the owner or other factors. The pay audit will also compare your payment amounts to competitor small businesses to ensure your pay is fair and competitive for employees.
A pay audit can be beneficial for your business if there are no inequalities in your employee pay and your pay rate is aligned with competitors. A pay audit will demonstrate that your small business is dedicated to equality amongst employees and that your business values fair payment. Your small business will also then promote competitor companies to address their payment inequalities.
11) Environmental Audit:
An environmental audit of your business will determine the impact your business is having on the surrounding environment. The environmental audit will assess your business operations, procedures, waste, recycling, environmental policies, water usage, conservation practices, and compliance with environmental regulations. The results of the audit will determine the hazards posed by your business to the environment. An environmental audit will generally be performed by an external regulatory body.
An environmental audit can be beneficial for your business. If your environmental audit demonstrates that your business is not impacting the environment, you can use this information to build a great reputation, avoid any fines for non-compliance, and set your business as an example to competitor businesses. If your environmental audit demonstrates problematic areas, you can use this information to take corrective steps to reduce your environmental impact and align yourself with environmental regulations for businesses in your industry.
SureBooks Accounting Services:
For financial business audits to be beneficial for your business, you need to have audit reports that are accurate, include all the relevant information, and are produced by professionals. SureBooks is a small business accountant that offers professional accounting services that can expertly assist you with your small business financial audits. Allow our accounting services to handle your financial audits correctly and in a compliant way so that you can use the reports to make the best decisions for the future of your business.
SureBooks is comprised of qualified and experienced accountants that offer payroll and accounting services perfectly tailored to small businesses. Through effective financial management, our accounting services will be your trusted partner for the financial audits of your business. There is no need to feel overwhelmed by business audits when your small business is partnered with SureBooks accounting services.
We offer high-quality, efficient, and personalised accounting services at an affordable rate for small businesses. We strive to offer accounting services that will ultimately benefit the financial health of your business and work towards growing your bottom line, which is why we keep our accounting services at a budget-friendly rate. Take the step towards success with SureBooks accounting services.
SureBooks offers fully accredited accounting services for small businesses. No matter your industry, our reliable and ethical accounting services will be the best partnership for your small business. You can trust that the financial audits we provide in our accounting services will be reliable, objective, and accurate.
SureBooks accounting services will provide you with ultimate control and understanding over your small business finances. Our accounting services use the latest accounting software, Xero, to provide you with efficient and effective accounting services. When looking for accounting services that will keep you on top of your business finances, provide you with expert advice on decisions, and improve your financial management efficiency, SureBooks accounting services for your small business.
SureBooks accounting services will be your expert, objective, and professional assistance for your small business financial audits.
