Tips to Prepare First Audit

External audits are usually considered stressful events for entrepreneurs and new CEOs; it is never a pleasant experience to have the company evaluated by an outside party. However, with adequate preparation, the process can go smoothly and provide valuable financial insights.

How to prepare for external auditing?

External auditing done right will provide valuable insights about the business; the auditor's final report will include suggestions on improving the company's internal controls.

To ensure a smooth process that yields the best results, here are few steps to follow:

- Ensure team commitment: building a new business can be time-consuming; founders and all team members will usually pay more attention and effort to tasks related to developing the business rather than auditing. However, auditing is crucial for securing funding, so all the team should be ready to support the external auditing team.

- Documents preparation: the team should ensure that all the right documents are prepared to facilitate the process. All documents related to equity, incorporation, employment contracts, and most importantly, any financial record or statement for the business should be available. It is crucial to keep track of all the business’s financial records organized.

- Setting expectations: next, the founder should plan for a kickoff meeting with the auditing team for alignment and a better understanding of the auditing process and get clarifications about deadlines.

- Onboard relevant employees: it is essential to assign a team member ideally from the accounting department, who is familiar with all the internal processes, and can support the external auditor, familiarize with the workplace, provide the required resources and facilitate the process.

- Ensure allocating enough time: founders tend to get overwhelmed by their business development, sales and clients and may consider tasks like external auditing less critical and a job to be delegated. However, founders must allocate time to understand the process, follow up and monitor the results.

- Expect problems: founders must also be prepared for prospect accounting complexities like revenue recognition, equity transactions, and gross margin presentations. All are very common in startups and scale-ups; expecting these complexities will help founders delegate the proper team members and resources to ensure appropriate handling.

- Understand expected outputs: the auditing process is not only about producing a well-written report about the company financial status. Founders may need guidance to better understand the report's key findings, which areas pause the most significant risks and reveal opportunities for improvement.

Finally, business owners and founders should prioritize auditing over their daily tasks, which may be challenging but integral.

How to appoint auditors for your business?

Choosing the right external auditing firm can be complicated and overwhelming, yet extremely indispensable. Founders and business owners need to ensure to work with a certified firm according to the country's laws.

The auditing firm must be able to provide more than just auditing; it should act as a partner for the business and guide the auditing process.

Below are the criteria for choosing the right auditor and auditing firm for your business:

1. Fees: For small and medium-sized companies, the cost is a critical factor in choosing the external auditing firm. However, while it is essential to select a firm with adequate fees, it is vital to ensure the auditing firm meets the regulatory requirements. Mistakes in auditing can have severe negative impacts on the business.

2. Qualifications: It is essential that the auditing firm is certified and meets the standards and the regulations that the regulator requires.

3. Audit Tips: It is preferable if the auditor has experience within the same industry as the startup so the auditor can provide more relevant services. Auditors possessing a deep knowledge of the business and the industry will be able to identify the riskiest areas for possible misconducts better.

4. Audit Tips: It is favorable to work with auditing firms with positive testimonials and references in the industry. Awards are also a good indicator of the performance of the firm.

5. Growth support: A good auditing firm will be a business partner that advises founders on the best practices and supports the decision-making process with accurate data. Auditing firms with an international foothold and global professional network can support future expansion plans by providing market insights about the new markets.

CEOs and founders who invest in a systematic auditing process with a quality certified auditing firm position their businesses as secure and investment-worthy for investors. Contact us today to explore our auditing and assurance services for startups.

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References:

https://www2.deloitte.com/us/en/pages/audit/articles/preparing-first-time-audit.html
https://reciprocitylabs.com/5-tips-prepare-first-external-audit
https://www.ag5.com/external-audits-whats-involved-and-how-to-prepare/
https://www.accru.com/2018/08/how-to-choose-the-right-auditor/
https://www.mazars.com.mt/Home/Insights/Blog/Appointing-an-auditor