Common fallacies about external audits
Anxiety. Fear. Stress.
These are common feelings people have when it’s time for an external audit. And I can understand those feelings. An audit puts people’s work under scrutiny, and some have had poor experiences with auditors in the past.
Yes, some auditors are tough to love. But your fears and anxieties are often the result of a false impression of what an auditor lives to do.
Some common misconceptions of auditors are:
1. Auditors are policemen – they’re just there to find faults
For some, auditors are there to find fault. This mindset slows the flow of information and work.
Auditors are there to review evidence and form an opinion. They will bring up material problems, but they don’t go out to find fault. Their findings and recommendations show management the areas they must work on to strengthen the business.
2. But for the law, an audit is unnecessary
It may seem so if you’re the sole owner/manager of the business. But when there are other stakeholders, such as lenders, how will they trust the financial statements you put out? Even where an audit is not mandatory, it serves many useful purposes, such as:
- Providing you with an opinion on your accounting system, and the quality of your financial statements.
- Highlighting risk and issues that can damage your business.
- Giving third parties confidence in your financials and reducing the cost of doing business.
3. Auditors are a pain–they are a distraction and ask lots of questions
Some see auditors as a distraction. Auditors take client’s time with lots of questions and demands for documents. The solution is:
- To prepare. Ensure you have a good filing system, so you can retrieve documents.
- Agree a timetable with the auditor and set aside an agreed upon time to meet.
Good auditors know they need your cooperation and must maintain good relations with their clients. They try their best not to be disruptive, or to stress you.
Next time you face an external audit, don’t be afraid. Prepare for the audit. Ask the auditors questions to understand what they want to achieve and find the best way to help them.
Written by Nana Baah Asiedu
Nana is an associate in the audit unit of SCG Chartered Accountants.