Ways of Auditing Company Financials

Below tips will assure your company has a robust internal monitoring strategy:

1. Hiring a CPA and tax attorneys to “Self-audit” your business  not only improves your business but also protects you from an IRS audit.CPA can ensure information is valid and in accordance with accounting standards (like the Generally Accepted Accounting Principles, or GAAP) .
2. Hiring a tax attorney, an accountant or installing accounting software program,will ensure you are following General Accepted Auditing Standards (GAAS) .They can also provide education to the business owner about how their business is running and how it can be improved.
3. Financial audits make sure all legal and tax rules are being complied with, which can prevent different legal issues that can arise when fraudulent or incorrect information is presented to the public or investors. In the U.S., keep tax receipts on hand for at least 7 years, as this is the statute of limitations on tax fraud.
4. If you have physical products or use equipment in your business, you will need to conduct physical audits as well. For example, inventory or equipment should be counted and visually inspected.
5. Cross-reference each part of your company’s accounting system. If you have a very large number of transactions, make use of statistical sampling.
6. Ensure your use of expenses for business meals, travel, and entertainment are believable. Daily commuting to work at a regular job or claiming any personal expense as a business deduction is not a valid. A good rule is if the spending is required to make money, then it can be deducted.Be sure you have proper receipts and records for any and all deductions.
7. Note major discrepancies between years and have documentation supporting why. If you contribute much more to charity one year than another, include an explanation as to why when you file your return, and include any receipts or other associated documents.
8. Determine whether your business has a sufficient accounting audit trail: Does your accounting software store associated documentation for every transaction, with relevant explanations for transactions that will be used for deductions?
9. System should monitor your company’s internal controls , and do reconciliation checks regularly on financial documents.
10. Separate accounting duties as much as is reasonable.Try tricks like internally numbering checks. Safes should be locked when not in use, and company software and computers should be password protected. Camera systems are beneficial for monitoring the execution of internal controls at retail businesses.

Reference: http://www.wikihow.com/Perform-a-Basic-Accounting-Audit