When is it necessary to audit a company?

Updated: 03/10/22

Company audits are an essential part of business management, as their objective is to detect possible errors that are occurring in the management of the entity, as well as the optimisation of business processes.

Nowadays there are different types of audits, from audits of accounts to environmental audits. In any case, it is essential to know what a company audit is and what a company audit is for.

What is a company audit?

An audit is an examination of any of the elements of an undertakingThe auditors analyse the company, from its economic or financial situation or its economic situation, to its environmental impact. Thus, the auditor submits the company to an analysis in order to know its particularities and to detect possible errors in the processes that are carried out within the entity. In addition, the audit will serve to propose solutions to these possible errors, improving the functioning of the business organisation.

What is the purpose of an audit in a company?

Conducting audits in the company is essential in order to detect failures in business processes and to solve them. Thus, the objectives of an audit are as follows:

• Knowing the real situation of the companyeither at a general level or in a specific area.
• Building confidence with investors, customers and suppliers. Through the audit, the company will gain in transparency and also demonstrate its intention to improve, which will generate confidence in investors, customers and suppliers.
• Adequate compliance with current legislation. This will save the company a number of problems arising from non-compliance with the applicable legislation.
• Detecting faults and weaknesses that occur in business processes.
• Improving efficiency and effectiveness of the operation of the audited company.
• Proposing improvements and solutions to rectify errors and correct the entity's weaknesses.

How to audit a company

Depending on the scope or area of the company to be audited and the applicable regulations, the audit will be carried out in different ways. However, broadly speaking, the steps to be followed to carry out an audit are as follows:

• PlanningThe first step is to narrow down the scope of the audit, i.e. to determine which business processes are to be analysed by the auditor. In addition, an audit programme should be established, determining the steps to be followed during the audit process and the objectives of the audit.
• Research and documentationIn order to be able to carry out the audit process, the auditor must investigate and collect the necessary documentation to be able to analyse the actual situation of the company in question.
• Report of resultsAfter the analysis process has been carried out, the auditor should prepare a report on the results, including the errors and weaknesses that have been identified.
• Solution planningThe auditor will also have to come up with the solutions that he/she believes are necessary to correct the errors and improve the company's weaknesses. In addition, he/she will draw up a plan for the implementation of the solutions.

Audits are undoubtedly essential examinations to find out what the company's real situation is and, thus, to be able to correct any errors that may have been detected.