External audits are independent evaluations of financial records conducted by accountants or auditing firms. They ensure standard accounting practices are followed and are often conducted annually, making it difficult for irregularities to go unnoticed. Non-profit organizations often include provisions for external audits to ensure transparency. Audit management software can simplify the process and ensure compliance with regulations.
External audits are audits of financial records conducted by an accountant or auditing firm that is completely independent of the client. An external audit can be conducted on the financial records of a person, business, non-profit organization, government, or any other type of legal entity. Audits of this type may be ordered by a regulatory agency or conducted at the request of the individual, firm or organization, as a means of ensuring that standard accounting practices are being followed.
The value of an external audit exists because the accountant conducting the evaluation of the financial records is considered above any type of bias or prejudice. In theory, this helps ensure that the audit can progress without improprieties and that the final audit result is complete and fully accurate. Often, an external audit is conducted at least once a year, after the accounting professionals who are employees of the business or organization have conducted an internal audit. This two-pronged approach to evaluating accounting records makes it virtually impossible for irregularities in financial records to remain undetected.
It is not uncommon for organizations and businesses to include provisions for an external audit in documents such as ordinances or statutes governing an organization. This is especially true in non-profit organizations that rely on contributions from members and other donors to operate. Often, audit findings are made available to members and others, allowing for the recording of donations and how funds raised were used to be transparent. Today, it is not unusual for religious organizations and other types of non-profit organizations to regularly conduct external audits and publish findings for the benefit of general membership, and for anyone interested in affiliating with the organization.
The process of preparing for an external audit is somewhat simplified by following a simple checklist. You can get such a list from the company that is scheduled to conduct the audit. In larger organizations, there is often an audit committee tasked with reviewing the checklist and making sure all accounting records are made available to the external auditor or larger audit staff, if the organization has multiple locations and branches . Today, the use of audit management software can speed up the process of conducting the actual external audit, making it much easier to address and resolve any apparent issues in a short period of time. An efficient software package can allow the auditors final statement to note any corrections made and be able to sign into the accounting records as fully compliant with current regulations and standard accounting practices.
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