How to Audit-Proof Your Small Business: Essential Record-Keeping Practices

Audit-Proofing is a process of performing financial transactions in a way that fulfills legal obligations, making them verifiable and traceable which leads to error-free Financial Reports for a prescribed period.

Understanding the Audit Process

To understand the process of Audit we will have to go through the following paragraphs. Following are the types of Audits that CPAs practice in Alberta Canada.

Internal Audit

Internal Audit is performed by individuals within the company. They are skilled and qualified CPAs who understand all facts and figures and know how to handle these facts and figures well. Internal Audit the preparation of External Audit.

External Audit

External Audit is conducted by Auditing Firms that have experienced, qualified, and skilled CPAs that are well-known for current issues and their best solutions. External Audit is the basic need of Small Businesses. Without proper External Audit, management cannot know the exact direction and the flow of the company.

Operational Audit

Operational Audit are performed to know the internal system of operations. The purpose of an Operational Audit is to get facts that demonstrate whether company policies are being followed in different departments of the company. It also provides information on how efficiently and effectively company resources are being used and if they meet management goals.

Financial Audit

It is the most important Audit for any type of Small Business. Financial Audit demonstrates the actual Financial Position that the business currently possesses. It deals with financial errors, omissions, and misbehavior with Financial Transactions. Financial Reports are discussed, evaluated, and rectified in this type of Audit.

Payroll Audit

A Payroll Audit looks at the internal system of payroll, reviews its process and procedure for management reporting. Payroll audits can perform by internal auditors or external Auditors like CPAs. It improves the running system of payroll by comparing it with company policies and with standard rules given by Government of Alberta and to do rectification, and CPA gives its recommendations if needed.

Tax Audit

Tax Audits and Financial Audits are mostly demanded by Tax Authorities. Tax Audit finds if there is any error or any hidden expense or income that is not declared in the Tax Return. Tax Audit shows the financial accuracy, Financial Reporting, and Taxable Income of Business. Tax Audit is conducted by Government Officials or Agencies if there are any discrepancy in Financial Reports or Tax Returns. This type of Audit also discusses the current law of Audit is enforced by the organization or not. ?To avoid Tax penalties, organizations prepare accurate Financial Reports and file Tax Return accurately and timely. CPAs again have a vital role in keeping away the organizations from Tax audits because only CPAs know how to prepare Financial Reports and how to file Tax Return in the Tax Department.

Triggers of an Audit

There are some errors and faults that initiate the process of an Audit. Those are as follows:

• Income from a hobby or side hustle
• Freelance income
• Cash income (including tips)
• Cryptocurrency Income
• Foreign income
• Investment earnings
• Dividends
• Gambling earnings (such as winnings from a casino or the lottery)
• Claiming business losses year after year.
• Higher income, higher chances of Audit.
• Higher medical expenses?

How Auditors Work

To create financial accounts, provide guidance, or audit and assess statements made by others, auditors review, evaluate, and analyze accounting records. Install or guide cost-tracking or other financial and budgetary data-recording systems. Auditors check Business Financial Record thoroughly for identifying errors and omissions to make true picture of Financial Reports. It also an important work of the Auditors to prepare reports of Audits conducted and present solution to errors and omissions committed by the accountant of the firm. Qualified CPAs understand every aspect of Business transactions, their behavior, and the best deal with that Financial Transactions, that’s why CPAs can prepare a true and right picture of the Financial Position of a Business.

Some important duties and responsibilities of an Auditor are mentioned here

• Audit of Financial Statement
• Risk assessment and management
• Evaluation of Internal Control
• Compliance Audit
• Communication and Reporting
• Professional Ethics and Standard

Best Practices for Record Keeping

There are some standard practices for good record keeping. One of the basic purposes of bookkeeping or having CPAs is to manage the record that can be easily evaluated and accessed at any future time. There are some standard practices to meet these goals.

Understanding Business Needs – First of all it is necessary to understand business needs, What type of record is needed to prepare, how it is prepared, and where this record to keep safe for future decision-making process.

Identifying Business Record – Secondly it is important to identify business record, it is a crucial step it involves understanding complete Bookkeeping, after this, an individual can identify records and able to set the priorities for that particular record.

Policies and procedures – The next step is to develop policies and procedure to record this Financial Information. It involves current practice and updating these practices on regular basis to improve Record Keeping Practice.

Record Management – Now after setting up policies and procedures, it is important to manage that particular record to avoid any discrepancy and make sure of the availability of this record when it is required.

Setting up workflow - It is also important to practice managing workflow of all team members to manage the burden of work. It should be balanced for all team members.

Employee access – It is also part of the record-keeping practice to have proper access for all the members of the team and to keep irrelevant persons from this important record to keep the secrecy of the record.

Employees Training – Employee training regularly is a fantastic practice in this modern era. New things are coming day by day, and keeping the employees trained is important for smooth running of record-keeping practices.

Feedback Back – Last but not the least, getting feedback from the team members is one of the key factors for the smooth running all the whole process. Feedback gives new ideas, eliminate the drawbacks of the system and it builds trust between team members.

Audit Proofing strategies

Keep proper Record – Having or keeping proper records is mandatory to make the Business Audit Proof. Good and relative records can easily be accessed and help to make future decision and make the Business Audit Proof.

Genuine Income – It is also important to enter in records the Genuine Income. It shows good impression on Financial Statement and Tax Return.

Documentation of Income – Proper record of Income, in Software or Paper, helps in Audit proofing.

Clear picture of the Record – It is a good strategy to have a clear picture of the Financial Record. Entering proper and true record make the Business Audit free.

Fake Expenses – When management or an Internal Auditor has a doubt or thinks that some expenses are not genuine, then it is called for External Audit.

Not showing Deceptive figures – Throughout all bookkeeping processes it is very important to have proper Financial Record with proper receipts no matter whether it is in Software or on paper but it should not be deceptive. Otherwise, it will lead to External Audit.

Hiring CPAs – One of the most important strategies is to hire Qualified, Skilled, and Competent CPAs for bookkeeping. Hiring CPAs means it is guaranteed to have Audit Proofing record because CPAs have skill and experience to handle each type of Financial Transaction. That’s why it is considered one of key factors to have CPAs in making Business Records Audit Proof.

That is why SAR Professional Corporation necessary to have proper bookkeeping for this type of Small Business because SAR Professional Corporation has a team of experience, Skilled, and Qualified CPAs.

Common Record-Keeping Mistakes to Avoid

Some common record-keeping mistakes should not be included in good Bookkeeping.

Record every Financial Incident – It is necessary not to void any even minor Financial Transaction. It is important to have every Financial Event recorded properly.

Don’t Rely on your team – It is also important to keep an eye on the work of your team members. Involve yourself in the whole process of Bookkeeping. Keep a random check of the work of your team.

No hiring a Profession Record Management Firm – It also a common mistake, not to hiring a Professional Record Management Firm. These Firms have CPAs, professionals, and qualified individuals who are compatible with proper Bookkeeping.

Improper Documentation – Improper Documentation is also a common mistake in Record Keeping. It is again efficiently done only by qualified CPAs.

Not digitalizing Paper Documents – In this modern world, it is important to have a digital Bookkeeping System. Nowadays it is needed to decide in minutes or seconds to compete with the market or with competitors so it can be done only with a computerized system.

Conclusion

At the end, it is concluded that it is difficult to have Audit-Proof Bookkeeping in Small Businesses because there are a lot of aspects that are necessary to keep in mind in the daily routine of Financial Transactions. There is a simple way to have Audit Proofing system, that has an affiliation with CPA firm. CPAs are professional and have proper knowledge of standard Bookkeeping procedure. CPAs are backed with strong knowledge of Bookkeeping and preparing error-free and true Financial Statements.

What is the role of SAR Professional Corporation in Audit Proof Bookkeeping?

SAR (Professional Corporation) is one of the excellent Bookkeeping firms in Calgary Alberta. We have a team of well-qualified, experienced, and skilled CPAs (Chartered Professional Accountants) who are ready to help small businesses maintaining Bookkeeping that leads to Filling Tax Return. SAR CPAs are well-trained and have a good track record of satisfying the Bookkeeping of Small Business. The work of SAR Professional Corporation speaks. Visit us to make your Bookkeeping Audit Proof and have an excellent relationship with our CPAs.

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Contact Us:

Phone: (587) 442-2918

Email: [email protected]

Website: https://www.sarprofessionalcorp.com

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