Much of running a business comes down to following key regulations as set by governing bodies. This is particularly the case when dealing with financial matters. No matter the size of your business or what industry you are in, there are strict guidelines set by the Australian Taxation Office that must be adhered to, with severe consequences for those who intentionally break the rules.
If you are not a financial expert, trying to decipher rules and regulations can be overwhelming. This is why many businesses opt to outsource their financial affairs to professionals, particularly when it comes to audit and assurance.
Audit and assurance are two terms that are often used interchangeably, but they actually serve very different purposes. What you do need to know is that both are important in order to run a business that is financially and operationally secure. Understanding these terms and how a financial professional can help you meet your legal obligations will set you up well on the path to success.
Auditing explainedAn audit is defined as an independent examination of a company’s financial records. The word ‘independent’ refers to someone who is external to your organisation. This can be a person that you hire or a governing body, such as the ATO.
Audits can be run for a number of reasons. Having completed your tax return, the ATO may inform you that they need to conduct an audit to obtain further information about your financial affairs. Or perhaps there is no issue from a legal perspective, but you personally are concerned about the financial health of your company. In this case, many businesses choose to hire out a financial professional to conduct an independent review and suggest areas for improvement.
An auditor will perform a number of assessments to produce a report that highlights potential risks as well as opportunities for growth. Results are discussed in relation to statutory standards.
Assurance explainedWhile some of the processes involved in assurance might resemble those of an audit, there are some key differences between the two.
Assurance involves analysing risks and financial performance in relation to your business objectives and industry performance. A financial professional conducting assurance is not checking whether you are following financial regulations. Rather, they are aiming to produce a detailed report that will assist those internal to the company — including stakeholders — make informed decisions.
Why work with a finance professionalThe key to successful audit and assurance is picking the right team to do the job. This is particularly important if you are preparing for an audit by the ATO or need to reassure stakeholders that your business is on the right track.
A finance professional who specialises in audit and assurance will be able to provide an objective, trustworthy assessment of your business. From there, you can make informed decisions and feel confident that you are in the best position possible to take on future challenges.
