Best Practices for an Effective Financial Audit

Audits are a great way to receive constructive solutions that improve processes and identify risks at your organization. However, to ensure your next audit goes as smoothly as possible and leaves everyone involved feeling satisfied and confident in the next steps that need to be taken, there are best practices that can ensure you are prepared.

Take a look at our top tips to ensure a successful audit that will make it easier to achieve your audit goals and objectives.

Reconcile Accounts and Prepare a Trial Balance

The audit process begins before the initial in-person meeting. A good first step is closing and reconciling all accounts, as this prevents balance sheet errors and allows auditors to check for possible fraud. Preparing a trial balance before the audit is also recommended, as this ensures that entries in a company’s bookkeeping system are mathematically correct and there are no errors. Once that is confirmed, more complex audit procedures and analysis can begin. If your organization has been through the auditing process before, it could also be helpful to disclose past audit findings to your new auditor so they have more insight into issues affecting your organization.

Create a Schedule and Stick to a Realistic Timetable

If you have found that audits for your organization have a trend of becoming a lengthier project than anticipated, then it’s time to develop a realistic audit timetable. The timetable should allocate time towards the planning phase, risk assessment, audit procedures, evaluating financial records and statements, and reporting. However, this could vary depending on the objectives of your organization. Setting up a shared calendar that includes both auditor and your team is a convenient way to ensure more accountability from your team, and is also more secure than exchanging confidential information through back and forth emails.

Don’t Be Afraid of Innovative Technology

Advanced technology is being used to transform many areas of the finance and accounting industries, and that applies to audits as well. Certain technologies help the auditing process become more streamlined, efficient and cost-effective. Analytics, in particular, help auditors better understand processes and data flow, create better audit recommendations and enhance an audit’s value proposition to your organization. So if you haven’t used technology to transform your audit process, the time is now! Asking your auditor if they use certain software or technologies throughout the process could be an indicator of capability and if they are a good fit for your organization. We recommend this article from RSM to learn how automation, analytics, AI and other innovative technology can improve the audit experience.

With these best practices, an effective, positive auditing experience is on the horizon! Remember that our team has experience with numerous non-profit and government agencies, so if your organization falls into either of those categories, we have the skills required to ensure you meet all audit rules and regulations. We also have experience conducting many types of audits, so whatever type of audit is needed, we can perform at the highest level.

Contact Us Today – Let’s work together to make sure your next audit runs as smoothly as possible!

Prevent Financial Fraud at Your Organization

As a team of investigators who have received extensive training at the best organizations in the world, we have encountered a variety of different types of fraud at many different types of organizations. Regardless of the type of fraud, however, one thing remains the same – it causes government agencies, non-profits, financial entities and businesses to experience major financial setbacks and embarrassment.

Check out the following statistics according to studies conducted by the Certified Fraud Examiners (ACFE):

• The median loss due to business fraud was $125,000
• More than 10% of fraud occurs within non-profit agencies, and 18.7% of fraud happens to governmental agencies.
• 66% of frauds were committed by individuals from one of six departments (accounting, operations, sales, management, purchasing, and customer service).

The Perry Forensic team is on a mission to prevent you from becoming another alarming statistic, which is why we have provided our best tips on preventing financial fraud at your organization.

Don’t Leave 100% of the Accounting Duties to One Person

Regardless of organization type, it is highly recommended that multiple people share accounting duties because this encourages employees to hold each other responsible for any suspicious activity. Implementing a system of checks and balances and separation of duties limits the opportunity for fraud. Outsourcing some of your accounting needs to a firm such as Perry & Associates CPAs is a great way to ensure a highly respected team of financial experts keeps your sensitive financial information safe and secure.

Conduct Regular Audits

Consistent audits are an effective way to identify risks, detect irregularities and ensure employees are following established internal controls that protect your organization from threats. It allows you to review your company’s policies and procedures and determine if changes should be made to safeguard your company. With all organizations, it has been proven that audits can be most effective if they are not routine, but unplanned, as it prevents anyone in the middle of fraud or a scam from covering their tracks.

Establish a Culture of Ethics and Integrity

While this may seem obvious, sometimes everyone needs to be reminded about fair employment practices and organizations need to stress the importance of integrity, honesty and transparency in all financial dealings. Encourage team members to speak up if they suspect any financial wrongdoing or have concerns about current financial practices. Better yet, establish a fraud policy and code of conduct that makes all protocols, procedures and potential consequences very clear.

Establish Updated Cybersecurity Measures

In our current digital age, every type of organization needs to implement new security measures such as two-factor authentication, encryption, ID management and more. This goes a long way in protecting sensitive information and reducing data breaches.

And remember, if you notice the following taking place at your business:

• Unusual cash transactions
• Mismatched payees
• Strange, out of character emails
• Questionable activity from those who have access to assets
• Suspicious looking documents
• High travel reimbursement costs
• Mishandling of donations or grant funds
• Missing inventory

It’s time to call Perry Forensic and identify the source of error or wrongdoing. With forensic services that range from litigation support, whistleblower allegations, embezzlement, money laundering, hidden assets, ponzi schemes and more, we can immediately, discreetly and comprehensively find ways to protect your organization and give you the upper hand.

You worked hard to make your organization a success – make sure it is protected with Perry Forensic!

2023 Tax Updates All Business Need to Know

For business owners, being aware of new business tax laws, legislation and obligations is crucial to planning for the year ahead and minimizing tax liabilities.

Before meeting with your tax professional, read our guide that outlines key tax changes in 2023 that could impact your business.

SECURE Act Updates That Affect Pension Plan Startup Costs

The SECURE Act has nearly one hundred provisions that discuss retirement savings plans. One change is the increase in Section 45E credit for all or a portion of employer contributions to small employer pensions for the first five employer tax years, starting in 2023. The credit for employer contributions is capped at $1,000 per employee, and the new updates allow for credit to be available to employers with fifty or fewer employees and is phased out completely for employers with more than a hundred employees. Additionally, the existing tax credit for qualified plan start-up costs for employers with no more than fifty employees is increased from 50% to 100% of such costs, starting with the 2023 tax year. Learn more about new changes made under the SECURE 2.0 Act of 2022.

Certain Businesses May Receive Higher Federal Tax Bills

The 2022 Inflation Reduction Act (IRA) and removal of temporary provisions in the 2017 Tax Cuts and Jobs Act will mean that in 2023, the federal government is placing more financial responsibility on businesses. However, Section 179D significantly increases the energy-efficient commercial building deduction, making it especially useful for the architecture, engineering, and construction (AEC) industries as well as commercial building owners. Also, some states have provided state-level tax cuts to provide relief to this change. Find out if your state is one of them.

New 1099-K Form Rules Postponed for One Year

According to the American Rescue Plan Act of 2021 (ARPA), beginning in tax year 2022, small business owners and freelancers who received more than $600 from third-party digital platforms were scheduled to receive Form 1099-K and report that income. Platforms such as Amazon, Etsy and eBay were also obligated to report this income to the IRS. While a postponement was declared after much pushback from businesses, businesses that fall under the requirements will receive a Form 1099-K in 2024 for the 2023 tax year. See what the IRS has to say about these new income reporting rules.

Be Aware of the SALT Cap

The state and local SALT tax cap states that since 2020, filers can deduct only up to $10,000 in state and local property and income taxes. Business owners who operate a pass-through entity in a high-tax state may find their deductions limited by SALT rules. However, recently a group of House representatives relaunched the SALT causus for last week, calling for relief from the $10,00 limit on the federal deduction for state and local taxes. Learn more about the SALT Cap.

Additional 2023 Inflation Adjusted Items

Take note of these additional inflation-adjusted updates that could have implications on your business 2023 taxes.

These are just some of the tax updates taking place in 2023. If this seems overwhelming, then we have good news – we are here to help! Contact us today if you would like direct assistance in preparing for the tax year ahead and our experienced experts will provide you with personalized tax strategy that helps your business find opportunities that enable growth.