2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778
Copyright © Daniel Cullinane CPA.
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
THE IMPORTANCE OF EXTERNAL AUDIT
Companies often hire external auditors in addition to auditing themselves. External auditors are accountants who work independently of a particular company. They examine company records and operations to ensure financial statements are accurate. External auditors are important to establishing your small business' credibility and to ensuring compliance with tax laws.
External auditors help you determine whether your small business is in compliance with all applicable Internal Revenue Service rules. An external auditor is not affiliated with your company and thus can redirect your company's behavior without fear of repercussions if you don't like what he has to say. An external auditor can catch small problems before they become serious and help your business get back on track.
Your financial statements will be more credible if an external auditor evaluates them and agrees that they are accurate. Credibility is important to small businesses, especially during their first few years of business, when they are trying to build positive reputations. Because external auditors don't work directly for your company, they are less biased. Thus, an external auditor's approval of your financial statements is more credible than that of an internal auditor.
Critique Internal Processes
Internal auditors can't effectively critique the company's internal processes because they are part of the company. External auditors, however, can observe operations from the outside and determine where the company is wasting time or money. External auditors often critique accounting practices and general operations. They can recommend behaviors to the company to reduce waste or promote greater efficiency in general as well as tighten accounting practices.
Double-Check Internal Audit
Internal auditors may be too close to the business because of their positions within the company. Some internal auditors also don't have enough accounting experience to accurately audit their company's financial statements. External auditors can look at the same factors as internal auditors and double-check their work. They can also train internal auditors in accounting principles by explaining how their analysis differs from the analysis the internal auditor performed.