Demystifying Business Audits: Understanding Assurance Services
In a recent interview with Mark Langejans, CPA and Assurance Manager at EHTC, we delved into the world of Assurance Services, particularly focusing on business audits.
Let's break down some key insights from the conversation:
Q: What exactly is a business audit?
Mark Langejans: A business audit represents the highest level of assurance provided by the firm. It aims to obtain reasonable assurance, or declaration of confidence, about the accuracy of financial statements through rigorous testing of transactions and balance sheet accounts.
Q: How do audits differ from reviews?
ML: Audits and reviews offer varying levels of assurance. Audits involve extensive transaction testing, while reviews focus on analytical procedures and inquiries. Both services cater to different client needs and regulatory requirements.
Q: What are some misconceptions about audits?
ML: There are some common misconceptions— audits aren't akin to IRS audits. Instead, they assess financial statements from a GAAP perspective, often required by banks for loan covenants or by investors for valuation purposes. (Note: The Generally Accepted Accounting Principles (GAAP) are a set of accounting rules, standards, and procedures issued and frequently revised by the Financial Accounting Standards Board (FASB)).
Q: Why are routine audits important?
ML: Routine audits serve as regular health check-ups for businesses, ensuring financial health and compliance with regulatory standards. They provide invaluable oversight, particularly for clients lacking robust accounting support/departments.
Q: What triggers an audit besides banking requirements?
ML: Audits may be triggered by external investors or regulatory bodies, especially for entities with significant debt or complex financial structures. Audited financial statements enhance transparency and accountability.
Q: How can businesses prepare for audits effectively?
ML: Effective preparation involves maintaining meticulous records of transactions, receipts, and supporting documents. While EHTC assists clients in audit preparation, independence constraints can limit our involvement.
Q: What benefits do audited financial statements offer?
ML: Audited financial statements add credibility and value to businesses, facilitating future transactions such as mergers, acquisitions, or loan applications. They also identify areas for process improvement and internal control enhancements.
Q: How does EHTC maintain an ongoing advisory relationship with clients?
ML: EHTC strives to maintain an advisory relationship beyond audits, offering insights on accounting changes, internal controls, and process efficiencies throughout the year. This proactive approach ensures our clients remain informed and compliant.
Understanding Assurance Services, particularly business audits, is crucial for businesses seeking financial integrity and transparency. The expertise of the EHTC Assurance Services team provides clients with confidence in their financial reporting, fostering long-term success and informed decision-making.
If you have further questions or need personalized assistance with Assurance Services, feel free to reach out to us for expert guidance!
