All businesses need to take care of their operations. This means working to strict policies and procedures.
Not only does a business need to do this from a practical and operational standpoint, but legal requirements may mean that you must do this. With regulations surrounding tax, data protection, and more companies must ensure they meet minimum legal standards.
There are several different types of audits, but which of these applies to your business needs?
Here are five types of audit that every savvy entrepreneur should know about.
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Internal Audit
As the name implies, an internal audit is something that a company will carry out on themselves.
This type of audit is generally used to ensure the business is operating as it should do and that all departments are running to the desired standard and within policy and procedure. This type of audit may also serve as a follow up to a complaint, or as part of an investigation.
Once the audit has been carried out, a list of suggested improvements you should make.
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External Audit
Often, to ensure that an audit is not biased in any way, a company will hire an audit company to carry out a full assessment of its operations. An external audit will look at the same things as an internal audit might.
Because an external audit is carried out by an outsourced specialist, there is never any conflict of interest. You might choose to hire CPA Firms in Los Angeles to carry out the audit for you.
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Forensic Audit
Following a financial irregularity or criminal activity, a forensic auditor will thoroughly assess a companies paperwork and finances.
Often, a forensic audit will be carried out ahead of a court case and their findings will be used in evidence within the case.
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Statutory Audit
A statutory audit is a legal necessity. There are several different types of statutory audits and these can be carried out by an official body appointed to do it.
Statutory audits may result in businesses being advised or demanded to make changes, or there could be fines or restrictions in trade imposed.
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Tax Audit
A Tax audit will be carried out by the tax office or any organization registered and instructed to do so. This type of audit will look at the financial and tax records and ensure that everything is above board.
The reports generated by this type of audit will go straight to the government.
What Other Types of Audit Are There?
In addition to the internal, external, forensic, statutory, and tax audits mentioned already, there are many other types of audits. These include environmental, compliance, and financial audits.
Whatever audit your business is facing, preparation is the key. If you keep your paperwork in order at all times, then you won’t need to do any additional preparation work ahead of your next audit.
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Interesting related article: “What is Income Tax?“