The 12 Days of Audit

Published
  • December 22 2016, 7:12pm EST

No More Partridges, No More Pear Trees

Some people may think pear trees, a selection of holiday birds, and a representative sampling of the Medieval European workforce are what people want for the holidays – but the good folks at BKR International, which represents 160 independent accounting and business advisory firms in over 500 offices and 80 countries, suggests your clients might be better off with an audit or review of accounting and operations, instead.

“Regularly reviewing processes and procedures to identify weaknesses is a value-add and helps build trust between you and your client,” noted executive director Maureen Schwartz.

With that in mind, BKR International put together this seasonally appropriate set of 12 reasons your clients should consider an audit or review (to the tune of “The 12 Days of Christmas”).

Twelve Crooks in Prison

Learn from the mistakes of others. If you come across a story about an individual or business in your industry that is in the wrong, read it. Find out what happened to avoid letting the same thing happen to you.

Content Continues Below

Eleven Sanctions Stymied

Ordinary or gross negligence can result in penalties (or worse). Avoid negligence with proper controls and by outsourcing specialty tasks, such as payroll. Additional training for less experienced staff is also advised.

Ten Legal Changes

Accounting laws are always changing and some are left up to interpretation. Make time to understand new accounting and auditing standards, and create a plan for implementing and communicating any changes to relevant staff and clientele.

Nine New Findings

Haven’t had an audit in a while? Internal controls should be reviewed routinely to identify weaknesses and deficiencies. Findings will provide the cause, effect and recommendations for improvement.

Content Continues Below

Eight Hidden Payments

Accurate financial statements are a must. All disbursements should require authorization and specific policies, and procedures for handling cash disbursements should be in place. (See the next “Why” on the importance of segregation of duties.)

Seven Bribes in Billing

We all want to trust our employees, but segregation of duties exists to avoid fraud and error (e.g., bribes, tampering, etc.). Keep authorization, invoicing and payment processing separate to discourage any temptation for fraudulent activity.

Six Bogus Entries

Financial statements and records should be reviewed for misleading entries (or false information). If misleading entries are found, completeness and clarity should be sought in response to the entry.

Content Continues Below

Five Internal Controls

Without clean books, you can’t make good business decisions. Check for accounting errors – including errors of omission and commission – and ensure that proper controls are in place to minimize errors.

Four Comment Letters

If you receive an enforcement letter, respond immediately. Failure to do so could result in the freezing of assets or even criminal charges. Remember, ignoring the problem will not make it go away.

Three Acts of Fraud

If fraud is suspected, consider working with a forensic accounting specialist. They are specially trained to identify the resources required to support your case, should your dispute go to trial. Using their accounting and investigative knowledge, forensic accounting specialists are able to detect acts of fraud, violations, money laundering and much more.

Content Continues Below

Two Background Checks

Always, always, always perform a comprehensive background check including criminal and employment history. Verify education, professional licenses and certifications, too. Watch for a history of criminal convictions or acts of dishonesty when an individual is handling the accounting and financials.

And one unqualified report

Which is what every company wants for Christmas, right?