How To Survive An Audit

By Randall Orser | Personal Income Tax

Old fashioned audit report written in feather on parchment. TNBusinesses do not only have to audit financial records these days. You can audit every facet of the business and the processes used by employees for a variety of reasons. Whatever the reason, an external party coming in to audit your business can be quite a nerve-racking experience for the business manager.

Many businesses need to comply with industry specific legislation and audits are one way of tracking that compliance. You may need to demonstrate compliance with security, occupational health and safety, or union regulations. Prospective customers and current customers can initiate audits to see if your business meets their needs.

Auditors will have certain criteria or benchmarks for your company to meet, and will compare your business standards to these criteria. If your business does not meet the criteria, the auditor will issue a non-conformance notice and will give your business a deadline to fix the problem.

Non-conformance in some audits can lead to a loss of licence, legal fines, or legal action taken against the company, and loss of customers. You could even find that your business has to shut down due to non-conformances in an audit, depending on the severity of the non-conformance, and the importance of the audit.

Preparation is the Key to Surviving the Audit

Spending time preparing for the audit before the external auditor arrives will save much time and headaches during the audit. Know what the perimeters and scope of the audit are. Although auditors may not provide the criteria unless asked, all auditors have specific criteria or benchmarks against which to audit the business.

If the audit is required to demonstrate legal compliance, the guidelines for the audit should be available from the government department undertaking the audit. Check each area in the audit and make sure your business is compliant before the auditor arrives. Get out the appropriate files and reports to have on hand to show the auditor your compliance when needed.

Internal Audits Help You to Keep Track

If you have an external compliance audit every two years, you should hold smaller audits in between yourself. These internal audits will enable you to pick up errors and to fix the procedures to match the external compliance requirements well before the external auditor arrives.

You can reduce preparation time prior to the audit by completing small audits internally, as part normal procedure. Audits, whether internal or external, give you the opportunity to see whether your business procedures are efficient, helpful, compliant, and if staff are following procedures correctly.

Review Procedures against the Benchmarks to Ensure Compliance

Review your current business procedures against the legal and external benchmarks or standards expected. Make sure that if your employees are following your procedures, you will automatically be compliant with the audit requirements.

Discipline Employees for Not Complying with Procedure

If your internal audits or other checks show that certain employees do not comply with the procedure, you may need to instigate further training and even disciplinary action, as required. Enforce your business procedures, so that employees are used to complying with the requirements and you will not worry that individuals will let your business down during the external audit.

Say as Little as Possible During the Audit

A common error made by business managers is actually telling the auditor too much. Allow the auditor to ask the questions. Answer the questions concisely and do not be tempted to add in extra information. Any additional information may lead the auditor on to a different track, and could show unexpected errors.

Negotiate for Time to Fix Identified Issues

When the auditor does bring an issue to your attention during the audit, you can negotiate for time to fix the problem before the auditor gives your business a formal non-conformance notice. This could save your business from paying fines or dealing with some of costs involved with a formal non-compliance. If you can address the issue within a couple of days, many auditors will hold the audit report open for you if you successfully negotiate and show the auditor a willingness to resolve the non compliance issue.

Respond Quickly to Identified Non-Conformance Issues

As soon as practical after the audit, send a report reply to the auditor with the necessary attached documents which prove your business is now compliant. This allows the auditor to close out the non-conformances and could prevent the auditor returning to check if your business has resolved the identified problems.

Preparing your business to survive an essential or legal compliance audit is not difficult, but does take some work and planning time. If you have everything in place prior to the auditor arriving on your site, your business is far more likely to survive the audit without any non-conformance issues.

About the Author

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