A finance audit has three main purposes. Firstly, it confirms your business procedures are in place to govern a business to obtain optimum profit levels. Secondly, it verifies compliance with all applicable regulatory agencies. And lastly, it protects your business stakeholders from fraudulent business practices.
When it comes time for your business's annual audit, you need to bear these aims in mind. After all, an audit is there to help you business, not harm it.
But to get the most out of your annual audit and ensure it doesn't take forever, you need to be prepared.
To do this, you must get these four documents in order long before the auditor arrives...
It's time to prepare these four documents and get ready for your annual audit
Preparing for your annual audit doesn't just help the auditors; it also helps you understand your job better, according to grfcpa.com.
This helps you increase your value to your organisa¬tion and it helps you use the auditor's suggestions more effectively. If you work together with the auditors, you're more likely to find new ways to improve efficiency and minimise mistakes in your finances.
And that can make preparing for next year's audit even smoother.
Grfcpa.com states that it's necessary to talk to your auditor before you start preparing your documents. The reason is, he may want to inspect particular documents. If you can agree on which documents he wants to inspect now, you can save time and confusion later.
Four of the most common documents your auditor will want to see include your:
1. Statement of Financial Position;
2. Statement of Activities;
3. Statement of Cash Flows; and
4. Notes to Consolidated Financial Statements.
Here's what you need to ensure is in each of these.
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The documents for your annual audit should contain this information
Statement of Financial Position must contain:
- Non-current assets:
• Property, plant & equipment;
• Goodwill; and
• Intangible assets.
- Current assets:
• Trade receivables; and
• Cash and cash equivalents.
2. Equity and liabilities equity
- Share capital;
- Retained earnings; and
- Revaluation reserve.
3. Non-current liabilities
- Long-term borrowings
4. Current liabilities
- Trade and other payables;
- Short-term borrowings;
- Current portion of long-term borrowings; and
- Current tax payable.
Statement of Activities should include:
1. Earned revenue
2. Contributed revenue
3. Revenue released from restriction
4. Total unrestricted revenue
- Programme expenses;
- Development expenses; and
- Admin expenses;
5. Total operating expenses
- Net unrestricted income (restricted income and income released to unrestricted); and
- Net restricted income (all net activities).
Statement of cash flow should include:
This must contain measures for the cash inflows and outflows from your core business operations. The operations component of cash flow reflects how much cash your company's products or services generate.
This must show any changes in your equipment, assets or investments relate to cash from investing.
This shows any changes in debt, loans or dividends that you accounted for in cash from financing.
Notes to Consolidated Financial Statements
This must contain additional notes and information around areas of concern including:
- Financial contributions;
- Operations and non-operating activities;
- Handling of cash and cash equivalents;
- Land, buildings and equipment; and
- Perpetual trusts, life income and annuity agreements.
Prepare these four documents and check they contain all the right information and your end of year audit will go quickly without any time consuming setbacks.