Every now and again, we have to go through audits. No one has a happy feeling when they think about the auditor coming for a visit. For business owners, they are costly and disrupt the normal flow of an organisation. For employees on the other hand, the news of an audit conjures up:
- Speculative and preempted stress
- Fear of what’s going to happen (Usually associated with the fear that auditors are going to dig up past mistakes that were covered up)
- Fear of loss of employment due to the Audit Report deeming their position unnecessary
- Down right panic
- Even kindled feelings of hatred due to prior beliefs and experiences (seeing other employees getting fired after an audit is completed)
There are measures that employers can take to lessen the stress staff feels during these procedures. This will in turn make the process a faster and smoother experience as employees will be more willing to cooperate.
Steps that Employers can take to make sure Audits are stress free:
Create Internal Protocols and Guidelines
A company must ensure that there are internal systems in place as the audit will be conducted in accordance with International Standards on Auditing (ISAs) issued by the International Federation of Accountants (IFAC) which were adopted by the Institute of Chartered Accountants of Jamaica (ICAJ). This means your Accounting is the art of identifying, recording, categorizing, summarizing, analysis and interpretation of financial transactions. More and internal control system needs to be done according to International Financial Reporting Standards. For example – all company accounts, based on local and international standards must be done on the accrual basis. Meaning all transactions are recorded in the period they occur even if no cash has been passed.
Talk about the Auditor’s Role
Employers need to clearly explain to staff, the role of the auditor. This will remove any misconceptions surrounding the process.
The auditor’s role is to express an opinion about the company’s upkeep of Accounting is the art of identifying, recording, categorizing, summarizing, analysis and interpretation of financial transactions. More records and presentation of the company’s financial statements. It is one of their responsibilities to ascertain whether the company’s financials are in accordance with international standards and if they are a true (or reasonable) and fair (free from bias, opinions and material misstatements) representation. That’s it, nothing more. The auditor’s role is not to review everyone’s work and look for who’s being fraudulent or has made mistakes.
Auditors realise that everyone makes mistakes and have an error buffer called ‘Materiality’. This is basically a calculation of how many errors can be allowed before it affects the outlook of the company’s financial statements.
Explain the Role of Management and Staff during the Audit
Management needs to meet with staff and explain the roles that they will have during the audit. Management is responsible for the preparation of the company’s accounts and financial statements so that the auditor can easily review them. Having a disorganised Accounting is the art of identifying, recording, categorizing, summarizing, analysis and interpretation of financial transactions. More system hinders the process. It is the employees’ responsibility to aid the auditor in whatever way possible. Answer his/her questions honestly and hide nothing. Work with the auditor to obtain the relevant organisational chart(s), transaction schedules, requested minutes, memos, data entry ports and access to all computer systems. If the staff is not compliant and documents are hard to find or are disorganised then the auditor may develop reasonable doubt about the company’s practises. This will lengthen the process and is not productive for anyone involved.
Create a Positive Attitude
Business owners need to foster a positive attitude about audits throughout the organisation. Welcome the auditor as a person there to help grow the business and improve efficiency and output. He/she is there to push the company forward, a role that adds value. Audits are not for the purpose of search and destroy.
Have meetings with both the auditor and staff before the process begins to explain the nature and operations of the business. This way employees become familiar with the auditor’s presence and manner, easing any tension they may have had. Understanding and cooperation is the key to fostering positive attitudes.
Do you have any experiences (bad or good) with audits? Share them in the comments section to let us know how it went.