6 Audit Myths Explained: What we actually do
Do you know the difference between an internal audit and an external audit? We must admit that the two are often misunderstood despite the fact that professional audits have been around for a while.
Audit Associate Hannah and Audit Manager Melanie explain some myths and misunderstandings around audits to help you get a better sense of what we do and how we can help your business.
Myth one: Audit types are all the same
There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits.
A common audit myth is thinking that audit, particularly internal and external audit, are the same.
Internal audits occur in larger companies where they have their own teams of people checking their internal processes and procedures. Conversely, firms like Cardens carry out external audits with clients.
So we go out to other companies and audit their accounts not their processes.
An audit does not mean the accounts are 100% correct! We only sample test them.
Myth two: Auditors are only here to find errors or fraud
Auditors only seek to support the recorded amounts to form and provide an opinion.
Financial statement audits don’t guarantee that any or all fraud will be identified within a company. The practice of performing an audit requires a questioning mind set, objectivity and skills in professional judgment. This should include an attitude of professional scepticism with regard to fraud.
Myth three: Auditors are only concerned with the past
Yes, an audit is historical in nature, and your past transactions are reviewed and included in the financial statements. However, audits help foster a culture that encourages transformation and growth.
Rather than view an external audit as a bureaucratic annoyance, consider embracing the audit as a tool for a stronger business, with improved systems and processes, that can open the door to future innovation.
Myth four: Auditors are responsible for the financial statements
“The financial statements are the responsibility of management. The auditor’s responsibility is to express an opinion on the financial statements.”
Although the external auditor may have suggestions or best practice advice on content matters, provide comments on how to present certain disclosures or even draft portions or all of the financial statements based on the information obtained from management, the financial statements are ultimately management’s responsibility.
Myth five: Auditors try to be a nuisance.
It’s true that auditors ask a lot of questions. It’s also true that auditors request time for support and follow-ups. But ultimately, we’re both working toward the same goal: to complete the audit effectively and efficiently to improve your business position.
Myth six: Audits are unnecessary for private and small businesses
This may seem true if you’re the sole owner/manager of a business. However, you should consider your other stakeholders, such as lenders, customers and the community. Professional audits change the way they trust the financial statements you provide.
- An audit is often seen as a proactive strategy to improve your business.
- Audit findings and recommendations show management inefficiencies and areas the business must work on.
- An audit highlights risk and identifies issues that can damage your business.
- The findings provide third parties with confidence in your financials and can help reduce the cost of doing business.
- They encourage transparency, both within your organization and for your shareholders.
Count on Cardens
Cardens is a trusted external audit firm and we were proud to become the only independent firm in England to win approval for public sector audits in 2016.
If you would like to discuss how our audit services can help your business, please speak with your regular Cardens contacts or email us at email@example.com