16 Aug 2023 Top 5 Things to Know if Your Company is Being Audited
As private citizens, the mere mention of the word “audit” can make our hair stand up. Long considered the bogeyman of tax season, audits mean paperwork, scrutiny, and additional liabilities to most of us. But in the professional world, audits don’t always carry negative connotations. In fact, the right audit performed by the right professional CPA can save you thousands—if not millions—of dollars by giving an accurate picture of what your business is worth.
As a tool for financial due diligence, audits are irreplaceable. When companies merge or during an acquisition process, a corporate audit ensures that everything is on the up and up. Even so, it can be sobering to see an auditor and their team in the conference room at your workplace.
So, why should you work seamlessly with an auditor? What are audits all about, and how do they pertain to you? Let’s dig in.
Everything You Need to Know About Corporate Audits – A Haynie & Company Guide
To understand why we shouldn’t be afraid of audits, we’ve spoken to Steven W. Hurd—Senior Audit Manager at Haynie & Company for over 11 years. Steven Hurd operates out of our Phoenix, AZ, location where he’s helped companies with their financial due diligence for well over a decade.
Here’s what Steven Hurd wants people to know about the audit process and auditors in general.
“We’re Here to Help”
One of the primary hurdles to cooperation during an audit is the notion that something sinister is going on.
For internal bookkeepers and accountants especially, the scrutiny can feel like an invasion of privacy. An audit isn’t about the individual professional or their performance. It’s about a company’s profitability, assets, and revenue and whether these key performance indicators have been accurately represented in negotiation.
“I understand that it feels intimidating to have someone come in and look over your work,” says Steven Hurd. “Our goal is not to make people feel bad and judge them and make them feel inadequate. We want to help them understand how to account for things.”
In the same way a car salesman wouldn’t begrudge a shopper for kicking the tires or cranking the engine, corporate accountants and bookkeepers shouldn’t assume a motive at play beyond the obvious—ensuring a good deal at the appropriate price.
It Helps to Understand the Audit Process
As with other things in life, we fear what we don’t understand. Because the audit process seems mysterious to us, we see nefarious aims where, in actuality, simple goals exist. To demystify corporate audits, we asked Steven Hurd to walk us through the process.
“There’s three main areas of an audit,” says Steven Hurd. “You’ve got planning, detailed testing, and financial statement preparation.”
“On the planning side, we’re understanding the company, we’re getting initial balances to look over, and we’re using our judgment to understand the key areas we want to look at. We’re providing a list of requests. They’re giving us the information we asked for. And then we start looking through details.”
After the planning stage, auditors like Steven move on to detailed testing and financial statements. “Once we’ve gotten comfortable with our testing of the accounting records and we’re comfortable with the numbers, we move on to drafting financial statements.”
Naturally, there’s some due diligence for the due diligence as well. “There’s a review process by managers to verify the testing is adequate. And then, as part of that, compile it in a financial statement format to make sure it’s presentable to anyone who’s going to look at it.”
It’s really as simple as that.
Transparency is Key
When people and professionals feel threatened, they clam up. For auditors, even simple answers can be difficult to get, to say nothing of detailed explanations for complicated financial statements and accounting practices. But there’s a surefire way to make the process easier for everyone—being transparent.
Honesty is the best policy, according to Steven Hurd. In fact, you might even get more help than you realize.
“If a company can be transparent about what concerns they have,” says Steven, “about what areas might be problematic, then we can dive in and tackle those areas with them. This is something you said is difficult, so let’s work through it and determine what the solution is.”
In his decade-plus of performing corporate audits, Steven has encountered the inverse of transparency. Some accountants and bookkeepers go so far as to hide information. This, as it turns out, can achieve the opposite effect.
“If you’re hiding it, it’s going to take us longer to come across the issue. It gives us doubt about whether there are more issues. We still have to tackle the issue in the same way as before, but it feels less collaborative.”
Prepare for a Corporate Audit Ahead of Time
If you’ve been informed of an impending corporate audit, there are steps you can take beforehand to better position yourself and make the process easier.
According to Steven Hurd, it helps if you take the following steps:
- Reconcile bank accounts
- Confirm you’ve recorded new fixed-asset purchases and sales
- Update accounting records to match credit card statements and debt agreements
- Organize company documents (board minutes, articles of incorporation, major contracts, etc.)
- Perform an in-house initial review to verify that your preparer did it right. This way, an auditor already knows that information matches.
Not only can these steps make the audit process smoother, they can ease you and your personnel into the idea of the audit. Preparation can make us feel safer and more comfortable. It’s easier to collaborate fully and without fear when you feel you’ve already done your own version of due diligence.
Find an Auditor with Local Experience
No two audits are the same, especially when they happen in different places. Each state, county, or major metropolitan area may have its own statutes or niche practice areas that deserve additional expertise.
In Arizona, for instance, where Steven Hurd oversees audits, they sometimes encounter unique clients with different considerations.
“In Arizona, we have charter schools that we audit, and there are specialized rules specific to our state that have to be followed. If you’re using someone who is local in Arizona and with relevant experience, then they don’t have to figure out what the rules are.”
The same is true for specific industries or when acquisitions happen across international or state boundaries. In short, ensuring that you’ve chosen the right auditor for the job can save everyone time, money, and headaches down the road.
“A local auditor with experience is preferable,” Steven Hurd says. “Different organizations can benefit from auditors with experience with their industry or business model.”
Trust Haynie & Company with Your Corporate Audit & Professional CPA Needs
The idea of a third-party financial review can be intimidating no matter who you are. But it’s best to appeal to the better angels of your nature and bring your thinking on the matter back down to Earth. As it turns out, auditors are not what goes bump in the night.
“Auditors are real people, too,” says Steven Hurd. “We’re just wanting to do our best to help out. And if there’s anything we can do to help or improve what you’re doing, that’s our goal.”
Buying or selling a company? Trust Haynie & Company with your Corporate Audit!
To arrange for a corporate audit in Arizona, you can contact Steven Hurd at his Phoenix office at (602) 962-3007. For help elsewhere, find a Haynie & Company location near you. At Haynie, our auditors, CPAs, and management consultants provide expert financial due diligence during life and work’s biggest moments. Audits and assurance services can help you make informed decisions that impact your success for decades to come. Contact Haynie & Company today to learn how we help businesses like yours make the best decisions possible.