10 Myths about audits BUSTED

1. Audits are always adversarial: While audits involve scrutiny, they are typically conducted professionally and aim to ensure compliance rather than being confrontational. The auditors are there to protect the interests of the users of the financial statements, be they the shareholders, loan providers, SARS etc.

2. Audits always result in fines: Not all audits lead to penalties; they often identify areas for improvement rather than punitive measures. The auditors do not go out of their way to find fault. Their work often identifies areas where the client is not complying e.g. employee tax, tax compliance status etc, and they can work with the client staff to rectify the issues identified.

3. Audits are only about finding faults: Audits also recognize compliance and best practices, not just shortcomings. Auditors like nothing better than a clean audit. We want to come in and do the work, ensure everything is compliant and move on.

4. Audits are always time-consuming: Audits can be efficient with proper preparation and organization. A basic rule of thumb to ensure a smooth audit is to have a supporting schedule and documentation for every balance sheet item e.g. if you have a provision for leave pay then have a schedule showing how the provision was calculated and documents supporting your calculations as part of an audit pack to give to the auditors. It makes life easier for everyone.

5. Only large companies get audited: Small and medium-sized enterprises (SMEs) are also subject to audits, depending on regulatory requirements. Audits may also need to be conducted to satisfy loan requirements, or in order to obtain a loan.

6. Auditors always come unannounced: All audits are scheduled in advance, allowing preparation and planning. The auditors have very busy schedules, so do not have the time to just pitch up unannounced. There may be exceptional cases when auditors are called in on short notice e.g. when a fraud has been uncovered, but this the exception, not the rule.

7. Audits are solely about financial records: Audits can cover various aspects like operational processes, IT security, and regulatory compliance, not just finances. The procedures which are becoming the norm are to cover all aspects of a business.

8. Audit recommendations must be implemented immediately: Recommendations often come with timelines and priorities, allowing for structured implementation. And the recommendations can be implemented as far as time and money allow e.g. an auditor may recommend a new server be installed, but the client may not have the money to buy a new server.

9. Auditors are out to find mistakes: Auditors aim to verify accuracy and compliance, not to uncover errors for the sake of fault-finding. As mentioned above, auditors like nothing better than a clean audit, so ensure you adhere to the rules and procedures put in place.

10. Audits are always conducted by external parties: Internal audits by company personnel are also common for ongoing monitoring and improvement. There are also forensic audits which are conducted in much more depth than annual audits. Agreed upon procedures are another form of review, which is in less detail than an audit and only covers certain areas.