While bringing a bookkeeper onto your small business staff is a great idea, an even better idea is occasionally auditing your bookkeeper. If you aren’t a bookkeeper yourself, you may not know for a fact whether you’ve hired a trustworthy financial professional. Here is a breakdown of how and why to use auditing services for your company bookkeeper.
Reasons to Audit Your Bookkeeper
It’s not just the IRS that conducts audits. You may already know that the way an audit works is an outside party examines your business accounts to ensure everything is in order and that you follow proper practices. Audits are not just a cause for worry. The process also offers you the chance to uncover business improvement opportunities that you nor your bookkeeper never realized before.
Different Types of Audits
Just as there are different benefits of audits, the same applies to different audits. With a compliance audit, you ensure your bookkeeper adheres to the latest compliance requirements and regulatory standards. Operational audits give you the chance to test your internal controls and risk management measures. This type of audit also gives you the chance to better meet your company objectives. Usually, internal employees conduct operational audits and report their findings to the board of directions.
Practically every company needs a financial audit, which is the type of audit this article focuses on. Financial audits share aspects with compliance audits in that financial audits also check to ensure a company follows the latest regulations. If you aren’t, you could suffer avoidable penalties, fines and fees.
How to Audit Your Bookkeeper
When auditing your company’s bookkeeper, hire a CPA as a controller. These financial professionals can be expensive, but it’s worth the expense to know whether your bookkeeper is as good as you hope. Also, when you hire a CPA, you hire a tax expert, an area of expertise that your current bookkeeper may not possess. There’s a chance that your bookkeeper overlooked a tax deduction, one that a CPA may spot.
Once you find a CPA whom you feel is a good match for you and your company, do not forget to think about whether this person would get along well with your bookkeeper. It may help to use collaborative software that allows you to create internal controls and ensure everyone agrees on transparency and auditing expectations. For instance, do you want the CPA and your bookkeeper to stick to a specific procedure during the audit while sharing and drafting financial statements? If so, be specific regarding methodology, timelines, and format.
How to Prepare for the Audit
No matter if you undergo a voluntary audit or one from the IRS, you must take steps to ensure you prepare for the process. One of the first things to do is divide your books by accounts, such as receivables and revenue, payables and expenses, debt, investments, and assets. Let everyone at your company know about the audit, even employees whom you feel have nothing to do with bookkeeping. This way, everyone can gather all necessary documents and information for the CPA if she or he requests it. During the audit, if the CPA or your bookkeeper shares information or a detail you don’t understand, ask for a breakdown of the information in terms you can easily understand. Seeing as you may not be an accounting professional, you are not expected to comprehend every finding or detail fully.
Set your business up for success and tap into your potential by auditing your bookkeeper. Take steps to protect the investment of time, money, and energy you’ve put into creating your brand and organization.