An effective financial audit is very important for companies in order to make their cash flow and business process streamlined. Here are the six important steps that audit firms use for an effective financial audit.
- Review internal reporting systems
Accounts and company finance details need to be accurate for a comprehensive audit to be carried out. if there is an issue in the reporting cycle, it is vital to hone in on this as quickly as possible. all documents, including invoices, receipts and bank statement. should be processed as soon as possible following their issue if important pieces of data are not provided in good time, the internal accounting process itself .
- Check and evaluate data storage procedures
Electronic records of all transaction from the last financial year should be on file and readily available to keep things simple . printed versions of this data would ideally have been copied in electronic form via scan or manual input
Where there are archives of data from previous years these should be just as easy to access under the data protection act personal information such as customer data must only be kept for as long as necessary .
- Review accounting systems and processes
This step requires a steady and systematic approach. Navigate through each aspect of the accounting system to ensure that all necessary information is present .
Keep a close eye out for mistakes made through human error – it`s likely that you`ll detect al least one .
The accounting system should ideally incorporate software to detect mistakes made in human input and correct them .
- Gauge the current threats of fraud and risk
Which internal controls are currently in place to guard against financial risk ? where are the weak points , and how can these be dealt with ? establish who holds the power and information to access financial records , and how each process is safeguarded to prevent thefts and discourage fraud . customer confidentiality is a primary consideration , and the prospect of data leaks and tampering must not go un-investigated
- Compare internal and external records
While the scope of the audit should not reach that of separate external auditing , important to be sure that financial data presented to shareholders and other interested parties matches what`s going on behind the scenes .
Check that the figures listed on internally -published cash holdings statement . financial performance records and income reports match those presented to external organizations . directly compare purchase receipts from suppliers with internal records of these transactions , where applicable ,to ensure that they present the same information
- Examine tax return ,reports and records
The lengh of time for which tax records must be kept on file varies from country to country in the uk it`s five years from the submission of the tax return .
Check that the tax reports submitted tally with internal records of returns and tax paid. Pay closer attention to areas in which figures are more likely to be artificially inflated , such as in expenses or annual revenues .
