If this is a new service for you or if you have been trying to streamline the process, here is some food for thought. Is auditing an integral part of your business? Is your audit process absolutely transparent? Will your team of auditors tell you the hard truth during tough times? If you have an internal audit team, the answers to these questions will mostly be negative. Auditing should be an impartial and independent activity – a task that adds value and improves the overall finances of the organization. It is important to track, monitor, evaluate, and constantly improve.
Accounting firms, these days, are aware of the legal and regulatory requirements. And that is what makes the process of audit crucial for any accounting firm. When we talk about auditors, they can be segregated into two categories – internal and external. While the internal auditor has a broader focus that includes but is not limited to financial information, operational objectives, risk management concerns, and compliance, external auditors are focused on reviewing financial information and look primarily into the records and reporting of the organization from an independent perspective.
Auditing is a complex process and is time and resource-intensive. Outsourcing auditing comes with multiple benefits – the top one being the ability to be impartial. This saves accounting firms from unnecessary legal and regulatory troubles. Let us understand their role in detail.
Why do you need an external body (outsourced teams) for auditing?
When you outsource your accounting tasks, you get access to independent professionals who are not a part of the organization that is being audited. Their major task is to analyze and examine the financial statements and records of the firm to ensure accuracy, compliance, and adherence to the local and global regulatory requirements. Their objective assessment can help auditors gain confidence in financial integrity and operational efficiency. Here are some of the key ways accounting firms can benefit from an outsourcing partner in auditing:
- Maintaining independence and objectivity:
One of the key advantages of external auditors is their ability to remain independent of any internal pressures. Unlike internal auditors, outsourced auditors are impartial and unbiased. This independence plays an important role in ensuring objective assessment without any conflict of interest. Stakeholders, including firm investors, creditors, and regulators keep this objectivity in high regard. It ensures credibility and reliability.
- Access to specialized expertise:
External auditors often possess specialized knowledge and expertise that the internal teams might lack. These professionals have extensive experience in auditing firms from different sectors. This exposure equips them with a broader and deeper understanding of industry-specific challenges, which can help small accounting firms cater to clients from different industries. Their expertise also enables the firm to identify potential issues and areas for improvement that are often overlooked by internal auditors.
- Access to impeccable regulatory compliance:
For small accounting firms, it can be extremely difficult to keep up with the ever-changing challenges. External auditors are acquainted with the latest regulatory standards, which helps these accounting firms ensure that their records, reports, and statements comply with all relevant rules. Maintaining compliance is important in avoiding legal penalties, maintaining the organization’s reputation, and fostering trust among stakeholders.
How can an outsourced partner add value to the audit process?
Audit in accounting is a complex process. It requires attention to detail, time, and resources to ensure that the financial health of the business is in its top-notch condition. Auditing holds a mirror for the organizations, enabling them to make the required amendments in the business strategy and decision before it is too late. Here are the top ways an outsourcing partner can add extensive value to the process:
- Improved risk management:
Accounting firms deal with critical financial information for their clients. Even a tad bit of carelessness can cause huge damage. Effective risk management is important for accounting firms of all sizes. External auditors always go the extra mile to ensure that. Through their thorough analysis of financial statements, and operational processes, outsourced auditing professionals can identify potential risks and vulnerabilities. By highlighting these risks, external auditors enable the organization to implement appropriate mitigation measures, which, in turn, helps enhance overall risk management.
- Improved internal controls:
External auditors help assess the effectiveness of an accounting firm’s internal controls. These controls are imperative to safeguard the assets of the organization. They are also responsible for ensuring accurate financial reporting and preventing fraud. In accounting, an independent evaluation of the numbers is important. This is one of the key areas where accounting firms have a backfoot when they have a team of internal auditors. Outsourcing firms, through their independent evaluation, can identify the weaknesses or deficiencies in the control environment. By addressing these issues, accounting firms can strengthen their internal controls, leading to more reliable financial information and reduced risk of fraud.
- Detection and prevention of fraud:
According to a report by the Association of Certified Fraud Examiners, organizations lose 5% of their revenue to fraud each year. This is a huge number, especially for firms dealing in finance and accounting. No matter the number and size of the fraud, the consequences are alarming – both financially and reputationally. External auditors are trained to detect early signs of fraudulent activities and flag issues that hide behind a blanket of false numbers. Their independent and objective perspective enables them to identify potential fraud schemes that internal auditors have a high chance of missing. Additionally, the presence of external auditors in itself can act as a deterrent to fraud as it makes the internal members more cautious.
- Improved financial reporting:
Accurate and transparent financial reporting is important for maintaining the confidence of the stakeholders, External auditors review financial statements meticulously. It helps them ensure that they present a true and fair view of an organization’s financial position. Their involvement helps identify and correct discrepancies, or misstatements. It makes the accounting firms more reliable and trustworthy in the eyes of the stakeholders, including the clients.
- Strategic insights and recommendations:
While the primary role of an external auditing body is to review and analyze the financial statements, they can also help accounting firms with valuable insights and recommendations for improving business performance. Small accounting firms, can benefit vastly from this as they often lack the means to hire a separate advisory body. Based on their extensive knowledge and strategies, outsourcing partners can help enhance efficiency and effectiveness. These insights can drive positive changes within the organization, leading to better performance and competitive advantage.
The Outsourcing advantage in auditing – Wrapping Up
Partnering with an outsourcing firm for audit services can seem challenging, especially if you are trying it out for the first time. What is important to remember here is that accounting firms need to maintain due diligence right from the beginning for this partnership to succeed. From outlining the business needs and volume of work to the desired services from the outsourcing partner, you should be available. The firms also need to ensure that the outsourcing partner they choose has expertise in audit, accounting, and bookkeeping services with a team of professionals who are trained to make your life easy.
Looking for an outsourcing partner who understands your needs? Write to us at connect@finsmartaccounting.com for more.
Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
