Business audits examine a company’s financial and operational procedures. They can be conducted by internal or external teams and aim to ensure legal compliance, ethical standards, and accurate financial representation. Audits may also identify areas for improvement in efficiency and performance. Publicly traded companies must disclose financial information to protect shareholders and the public. Procedural audits may cover environmental and worker safety laws. Internal controls are maintained by the company, while external audits may involve third-party or government auditors. Refusal to be audited may be seen as an admission of guilt.
A business audit is an examination of the financial or operational procedures at a company. Audits can be conducted by an internal or external corporate audit team and can perform a variety of functions. While many people think of tax authority audits when they hear the word “audit,” corporate audits aren’t just about taxes. The audit aims to confirm that companies are operating within the law and that their stated ethical standards are confirmed by their practices.
In a financial sense, a business audit involves a detailed inspection of financial accounts and practices. Auditors look for financial irregularities that could be signs of tax evasion, embezzlement and other illegal activities. For some financial audits, auditors may also be concerned with how to help the business operate more efficiently and effectively by looking at ways the company can cut costs and improve performance. Others may be more interested in ensuring that the company’s financial condition is accurately represented.
For publicly traded companies, financial audits and disclosure of financial information are required to protect shareholders and members of the general public. Audit results and the most recent financial documents must be made available to those who ask. An audit is designed to act in a regulatory capacity, keeping companies fiscally accountable and honest about their financial practices and economic situation.
Procedural audits can cover a number of different areas of a business. Auditors may be interested in confirming that a company complies with environmental laws, laws to protect worker safety, and other types of laws, in which case they may be external. A procedural business review may also involve an assessment and evaluation of practices and procedures in a company, usually with the goal of improving operational performance. If auditors identify areas where the company appears to be performing inefficiently or questionably, plans can be developed to address these areas of deficiency.
In the case of an internal control, an enterprise control is maintained by people within the enterprise. External audits may involve auditors hired by the company, in which case the company uses a third party to make the results more reliable. Government agencies may also engage their own audit staff to look into a company and its practices. In these cases, while it may be possible to refuse the audit, refusals are often read as admissions of guilt and when the government successfully enters the company to perform a corporate audit, it will be carefully scrutinized.
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