Audits are a type of assurance service, the purpose of which is to form an opinion on the accuracy of an organization’s financial statements. Because auditors are objective sets of eyes on the financial health of an organization, it may seem like hiring one would help organizations succeed — but that’s not always the case.
For starters, organizations have more options than the whole-hog audit process if they want a CPA firm to check their books. There are multiple levels of services that auditors can provide according to the true needs of the organization. And at the end of the day, the decision to hire an auditor shouldn’t be based on seeking extra reassurance but rather on getting the financial services the organization actually needs.
When to Consider Getting an Audit
1. When It’s Required.
The best reason your organization should get an audit is that some external stakeholder requires it to be performed as part of a contract or agreement. Required audits can come from many sources: the federal government, private banks, mortgagors, grant or ownership agreements, and bylaws, to name a few.
Always read agreements carefully to see whether they require financial services to be performed on your organization
When audits are required, there’s a clear goal and purpose established from the beginning, helping those involved with the audit process track progress, work together, and communicate effectively.
2. When There’s a Major Transition.
Organizations that are planning an acquisition, re-financing, re-structuring, or sale will often ask for an audit to ensure they can accurately plan their financial future. Sometimes the organization will be required to perform audits indefinitely once the change is complete, but these can also be one-off engagements for the auditors.
One thing we recommend for companies who are looking to perform a first-time audit is to start small. The majority of organizations aren’t capable of completing a new audit without a rigorous, strategic plan. Instead, start by asking for a compilation (least comprehensive, least expensive), then a review, then an audit (most comprehensive, most expensive). This ensures your organization’s numbers are organized in the correct way before an auditor checks and forms an opinion on them.
3. When It’s Best Practices
Finally, leaders can choose to hire an auditor for assurance services as a form of financial best practices. In these cases, you must be clear about the specific goals of the audit (or compilation or review) with the auditor.
As auditors, we hear many calls from people who want an audit for their organization, but after listening to their concerns and goals, we can recommend they lower their scope to a compilation or review, because the audit won’t serve them any better than the less-expensive option.
Audit Service Rule of Thumb
You should never feel pressured by a CPA firm to pay for services you don’t need. Chances are that if things are going smoothly in your organization, you don’t need an audit, review, or compilation. And it also doesn’t mean that paying for an audit will automatically resolve problems you’re seeing — whether internal or financial.
The rule of thumb we typically tell people who are looking for an audit is that if it’s not required now or in the near future, you don’t need an audit.
But if you know you want one and are looking for a friendly auditor to do it, we’re happy to help! Contact us today and we’ll get the conversation started.