Rancho Cucamonga accounting firm explains the importance of business auditing services

The word “audit” can strike dread in the hearts of business owners or managers. It conjures images of IRS agents camped out in corporate offices, combing through the books, questioning every transaction. In reality, however, the importance of auditing is for evaluating the effectiveness of internal controls in your company. Regular auditing from Whyte & Associates, Inc. in Rancho Cucamonga can help you avoid an unpleasant IRS scenario, and these services provide many additional benefits in managing your enterprise.

Importance of auditing services in Rancho Cucamonga to meet business goals

You have ambitions for the success of your business, and you have put programs into place to achieve them. Are they working? An internal audit helps to answer that question and highlight areas that may need adjustment to meet your corporate objectives.

Auditing services delve into business processes, evaluating the effectiveness of:

• Supervision and monitoring
• Controls intended to prevent and detect unusual transactions
• Performance measurements
• Operational productivity
• Business recordkeeping

You probably already have a manager and bookkeeper on staff, who have deep insight into how current processes work. So why use an outside accounting firm for the audit function?

First, those individuals who have been involved in development of processes tend to unconsciously defend workflows, even if there are inefficiencies or other flaws. It is simply human nature to protect what you have helped to build. Second, employees most qualified to audit systems are also those most likely to be involved in irregularities. Third, auditors aren’t always popular. Some employees will not be pleased at having their work closely examined. Using a third-party auditor avoids conflict among employees or between employees and management.

Internal auditing results in documentation of irregularities found (which management may choose to investigate further), and informal proposal of improvements. With Whyte & Associates, Inc. auditing services, there is no pressure about how to proceed – just the professional advice you need to make informed business decisions.

Managing risk of misstatement

A company’s financial reports are meant to be an accurate reflection of assets and liabilities. That information is essential in determining how to allocate resources to projects, equipment, and salaries. It indicates which product lines are returning the most and least profit. Reliability of financial reporting is also critical to a potential investor or buyer.

Are your company’s financial reports dependable? A material misstatement, whether intentional or inadvertent, could create havoc in your organization’s viability. Internal auditing assesses the risk of misstatement, and pinpoints appropriate modifications that help you produce goods or services with consistent profitability.

Detecting and preventing fraud

A 2017 article in Forbes indicated small businesses (less than 100 employees) suffer a fraud loss of $154,000 on average, from customers, employees, and others. It commonly occurs in the form of:

• Identity theft – Using your company’s identity obtained from computers, financial and bank statements, or federal tax ID number to access credit.
• Payroll fraud – Though large corporations can also be impacted; payroll schemes are more frequent in small organizations. What characterizes payroll fraud? Advances that are never repaid, an employee clocking an absentee coworker in, or overstating hours worked on timesheets.
• Cash fraud – There is a surprising amount of counterfeit money circulating in this country – about $70 million of it. Accepting fake bills means your company does not get paid for a sale, and possibly makes change using valid currency.
• Friendly fraud – While it may not be overt theft, there is nothing friendly about returning stolen merchandise for cash refund, claiming a mail order item never arrived (and demanding it be replaced), or “free renting” through a purchase/use/return cycle. These and other defrauding ruses can have a significant bottom line impact.
• Workers compensation fraud – When the United States formulated a state-based program of worker’s compensation in the early 1900s, it served as a model for protecting both employers and employees. When it is abused, however, (such as a person claiming to be injured on the job when the accident occurred away from work), it places an unnecessary burden on operating margin.

Internal auditing services are instrumental in revealing fraud and laying the groundwork for prevention. Audits can help you protect corporate financial information and accurately track payroll transactions. Auditors guide employee education programs in spotting illegal currency and return fraud. An audit program helps your company set up systems to document everything you need to report and defend workers compensation cases.
Audit serves another vital role in fraud prevention – deterrence. Having a reputation for an aggressive audit system and tight controls can keep your organization from becoming a target for fraud.

Let’s work together to keep your company operating smoothly and successfully. Call (909) 575-0080 to talk with one of the accounting professionals at Whyte & Associates in Rancho Cucamonga about auditing services.