Reduce the Cost of a Financial Audit

Audits in Manufacturing

Every business is subject to various types of audits. Without the tools to easily pull financial, inventory, and process-related data, audits can become time consuming, error-prone, and expensive. Technology that integrates all your business data allows you to simplify your internal audit process and better prepare for external audits, ultimately saving time and money.

What are Financial Audits?

Publicly held companies are required to conduct financial audits, which are investigations of the accuracy of an organization’s financial reports, comparing statements to real data. This is to ensure that shareholders are receiving fair and accurate information, and includes tax audits, which confirm that a company is complying appropriately to taxation laws and reporting. External audits are conducted by organizations outside of the company staff, and all external financial audits in the United States follow the same standards called the generally accepted auditing standards (GAAS), which are set by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) (1). Being able to conduct financial audits on your own books prepares you for a potential external audit and discourages internal fraud and theft.

What is the Cost of an Audit?

Financial audits can be expensive. Auditor fees vary based on the time it takes to complete an audit and the complexity. In a 2018 survey by the Financial Education & Research Foundation, 83 public companies reported average audit fees of $9.8 million and a median fee of $3.7 million—an increase of 4.1% from 2017. Audit fees for private companies averaged about $139,000. Some financial executives reported large increases in documentation requests as reasons for the increased time and expense to complete the audit (1). Companies can reduce costs of financial audits by centralizing their operations. On average, public companies with centralized operations paid $3.9 million for their annual financial statement audits, while those with decentralized operations paid $9 million in 2013. In the case of private companies, audits averaged $145,500 with centralized operations and $474,000 without (2).

How Do You Reduce the Cost of an Audit?

External auditors require financial statements, inventory information, revenue and cost reports, sales orders, and any other requested information to conduct a thorough, accurate audit. Being able to provide reporting up to the standards of the IRS and other financial institutions on-the-fly minimizes disruption to daily business practices and results in significant cost-savings. Accurate, real-time data that is automatically synced across all your accounting and operational processes into one “single source of truth” allows for simplified audits and easy reporting. Auditors then do not have to waste time tracking down information in spreadsheets, resulting in a faster and cheaper audit.

Financial management software that automatically triggers updates as soon as a business transaction occurs ensures that you always have accurate and up-to-date financial information. This simplifies on-the-fly reporting for when auditors request a closer look into your financials and eliminates manual errors that occur when tracking financial information in spreadsheets. You can track your cash flow, budgets, inventory and compare your actual to your planned figures in real-time and pull a wide variety of reports to comply with industry, internal and government regulations. Financial audits no longer need to be expensive or disruptive to your business!

Sources:

1. 1. https://sfmagazine.com/post-entry/december-2019-lower-the-costs-of-your-external-audit/
   2. https://www.accountingweb.com/practice/practice-excellence/survey-public-and-private-company-audit-fees-went-up-in-2013

Learn more on audits in the manufacturing industry:

Manufacturing Audit Whitepaper

Learn more on audits in the food and beverage industry:

Food Audit Whitepaper