If you run a company with branches worldwide or you partner with companies that are based abroad, you may already be familiar with the typical international business protocol, but might not be too familiar with international auditing.
Auditing, the process of painstakingly tracking small financial details to ensure that all records are honest, accurate and represent the reality of a company’s financial health, has different standards and regulations in just about every country, making it difficult to figure out how to comply with rules when your company straddles on or several global borders. However, auditing is essential to ensuring the health and honesty of any company, so taking the time to understand it and make sure your business is complying is well worth the effort. To get started, here are a few of the most important facts you need to know about auditing and why it matters for international businesses.
1. Financial Auditing Keeps Statements Accurate
If you’ve employed auditing services in the recent past, there’s a good chance they worked on financial audits for you. This well-known area of auditing is also one of the most common and plays a key role in keeping a company’s financial statements accurate. In order to ensure a fair representation of your company, financial auditors look through your statements and transactions carefully to identify any potential mismatches, errors, or discrepancies.
Additionally, some more thorough audits may require in-person interviews with higher-up company financial officers, such as the treasurer or chief financial officer. Finally, a report is written up and submitted to the board of directors. In the case of an international company, this report may allow the board of directors to target only those offices that need help rather than wasting time contacting all the global offices.
2. Internal Auditors Ensure Compliance
Even as a large, international company, you likely still employ some internal auditors. In companies that hire in-house consultants, for example, it’s not uncommon to see in-house auditors as well. Similarly to financial auditors, these specialists can examine your financial records, but with a focus on addressing compliance. If there are any compliance issues found in accordance with the usual accounting principles, they can report this to higher-ups for immediate rectification. Some of their regular duties may include individual interviews, evaluating transactions, and carefully reviewing internal processes.
3. Operational Auditors Improve Your Processes
As anyone who runs a company knows, good structure and organization are central to avoiding chaos and miscommunications. This is especially the case for large companies with several international branches, where a poor organization can lead to serious mismatches in expectations, which can end up harming the company as a whole in the long run.
To prevent this situation, you may want to work with an operational auditor. These specialists can examine your processes, policies, and procedures to help you pinpoint areas that are working and those that could use improvement. They may do this by interviewing employees, examining documentation, and assessing the efficacy of a given policy. They can give you helpful suggestions to improve your company’s efficacy.
4. Forensic Auditing Helps Prevent Financial Crimes
You likely don’t have any forensic auditors in-house but may want to employ them on a regular basis to conduct a thorough review of your company’s finances in order to spot and prevent possible financial crimes such as fraud. If you suspect a crime has already occurred, forensic auditors can help review transactions and statements to pinpoint where it happened and who might have done it.
Sometimes, this information points to bigger problems and can help law enforcement gather evidence, build up a strong case, and solve crimes. In a large international organization, it can sometimes seem difficult to keep track of every nickel and dime and the actions of every employee. When something goes off the rails and you suspect an employee may have been cheating the company, working with a professional forensic auditor can be the key to identifying the fraud and getting your company’s financial health back on track.
5. Compliance Auditing Ensures Legal Stability
One of the biggest headaches for any big, international company is keeping up with the different legal regulations in the different places where offices are located. Making sure you’re fully complying with all relevant government rules and regulations, however, is of paramount importance, since infractions could, in the worst of cases, force your entire company to shut down. To prevent this, you may want to work with compliance auditors, who specialize in an area’s laws and can make sure that you’re following relevant rules to the letter. Given the consequences of non-compliance, this extra expenditure is well worth it.
While as a business owner, you may already be familiar with international protocols, cultural differences, time zones for conference calls, and other ways to solve problems related to running a global company, you may not be as familiar with auditing. It might not seem as glamorous as some other aspects of running a worldwide business, but auditing is central to ensuring honest and accurate financial records and checking up on the financial health of your company. This can not only have financial ramifications for your company’s budgeting and planning but can even make a difference in sales prices during common business processes such as mergers and acquisitions.
To ensure financial accuracy and legal compliance wherever your company is located in the world, it’s best to take the time to understand international auditing and its importance. With these key facts under your belt, you can look forward to operating a well-run, well-informed, and honest company for years to come.
