Four Unexpected Benefits of a Financial Statement Audit
Financial statement audits can sometimes seem intimidating or disruptive or, if necessary, something required to comply with a banking or bonding requirement. However, financial statement audits also represent an opportunity for an enterprise to learn more about itself and unearth substantial benefits in a few different categories.
#1 Internal Process Improvement
A key focus of the audit process is to evaluate your Company’s processes for weaknesses or inefficiencies, and subsequently, to make recommendations to help offer improvement in these areas. As auditors work with a multitude of clients in a variety of industries and sizes, they will inherently have a rolodex of previous client processes that they can call back to while evaluating your Company’s operations. With this level of referential experience and a fresh set of eyes on your processes, blind spots in your business will be addressed and improved seamlessly throughout the audit process.
#2 Confidence in Financial Data
Being able to provide a key third party with an audited financial statement report will immediately establish an elevated level of trust in your numbers. Whether it’s a bank requesting a financial statement to review your financial health for a new line of credit, a bonding company, a new customer who’s curious about the recent trajectory your business, or a potential investor interested in your cash flows and EBITDA, the first question from one of these external stakeholders will likely be whether you have financial statements readily available for review. A third party will often have more confidence in what the numbers represent when they are accompanied by an independent auditor’s report.
#3 Analytical Insights
Your Company’s internal reporting data will be evaluated continuously throughout the audit process, and like the above-mentioned process improvements, strategic takeaways can be gained from this analysis. For example, analytical reviews of your company’s cash flow metrics are reviewed in-depth during an audit. Organically resulting from these procedures is the identification of inefficient cash management practices. Advising a Company on how they can optimize their cash collections and disbursement cycles is just one example of a beneficial byproduct of these analyses that is baked into the audit process.
#4 Strengthen and Simplify Strategic Planning
By working through the required procedures of an audit, a variety of complex tax topics will be addressed and refined simultaneously. For example, if you have an uncertain tax position on your Company’s state tax nexus liabilities, an auditor will need to identify and address all uncertain tax positions of your business to ensure that the positions taken are adequate from a compliance standpoint (and that they are the right decision for your particular company as a whole). These valuable tax conversations that are built into the audit engagement will naturally refine and optimize your team’s tax strategy.
Intangible Benefits of a Financial Statement Audit
The intangible benefits of a financial statement audit are exceptionally valuable to any Company, and they do not end with the four benefits detailed above. If you are interested in learning more about what the audit process entails and the potential gains your team can make as a result, please do not hesitate to reach out for more information.
As always, should you have questions on this or other matters affecting you or your business, please call 215.675.8364 or email us to speak with a CPA today.
DISCLAIMER: All communications by Wouch, Maloney & Co., LLP intend to provide general information, as of the date of the communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. Please be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.
