Has an upcoming audit made you worried? Have you spent days preparing it but still have the butterflies? Fear not, for someone once said, “Do the thing that fears you the most.” But don’t jump off a building if you fear height, don’t be one of those people.
Audits are not that bad at all. It is not something to be scared of. The financial statements of your company would give you and your company insights about your business which could prove helpful over the future. It is also a validity for your company, of its good health and as a surety to the financial stakeholders of the company that the policies and procedures are being carried out in the way they were intended to. It is proof of the verdant health of your company.
On the other hand, however, bad audits can have corresponding consequences as well.
WHAT CAN LEAD TO BAD AUDIT
Sometimes, companies try to hide their financial shortcomings by forging financial records to impress the investors. They try to outsmart it, but if caught, could have serious ramifications. But it’s not just the nefarious businesses that can have a bad audit. Sometimes even the ethical ones fall prey to it. For instance, lack of detailing like missing out on comparative studies of the quarter output of this year and the previous year can lead to audit failure. Sometimes the bookkeepers maintain the record properly but haven’t converted the numbers to percentages. It would lead to the person leaving the auditor having to calculate it himself, thus becoming more prone to errors and misinterpretations. Not identifying the problem or the shortcomings of internal audit is another way that could lead to bad auditing. These are some of the instances which can lead to a bad audit. Try to avoid these.
CONSEQUENCES OF BAD AUDIT
The consequences of bad auditing are hazardous for you and your company. By chance, if the auditors fail to catch the inaccuracies in your numbers and overlook that, you would be in deeper trouble. It would be so because the problem would keep piling up and be aggravated to that point from where there would be no turning back.
But there are other ramifications as well. Consider the investors in your business. A poor audit would leave a negative impression on them that would ultimately lead to assuage of trust. It is necessary to keep these investors happy for the growth of your company. Sometimes it may so happen that bad auditing would lead to leakage of data. This leakage could cost you dearly if the information lost is sensitive or someone sues you, which can happen in some instances. A large company can manage these issues, but it would be twice as hard for the smaller companies. Loss of reputation amongst the stakeholders would lead to lessening the value of your company. It may even lead to you losing your client base that has detrimental effects on business. Cost increases as a result of poor auditing of your business. You have to spend money to find the problem and its concurrent solution. You’d have to pay fines to the banks and the other financial institutions for your mistakes. Lastly, your business could directly come under the scrutiny of the federal agency. They would flag your company and keep an eye on you, which is not necessarily bad, but better be avoided.
Hence, a good audit will go a long way in keeping you and your business safe!