Auditing’s relevance cannot be emphasized. A qualified auditor can not only rapidly resolve your concerns, but also assist you in improving your business. Although the major reasons for a financial audit are related to business and legalities, it’s crucial to remember the psychological side when interacting with other entities like banks, clients, and shareholders. You will gain more trust from your coworkers and government agencies if you undertake regular audits.
What Is a Financial Audit?
An auditor will arrive and perform a thorough investigation of your company’s financial records as well as any statements made by your accountant (s). Any tiny detail missed by your own system will be discovered during the audit and recorded in a report. While an audit can be undertaken internally, it is ideal to hire an external expert who is unconnected to the organization in any way so that their report is as neutral as possible.
Regular audits are vital for a variety of reasons, but the most crucial are accountability and excellent business practices.
1. You’ll get a comprehensive overview.
You’ll have the final report in your hands once the auditors have finished their investigation. You’ll get a thorough picture of how your business is running from here. Even if you’ve spent a lot of time making sure your organization has clean records and follows every rule in the book, there are going to be minor errors that need to be addressed.
The analysis will also show you where your organization is the most stable. A successful manager must know where to invest his or her time, and the first step in doing so is recognizing where you don’t need to devote as much.
2. Get a Different Point on View
Even in the best possible team, people, including yourself, can become complacent. This can lead to major issues in the future, which is why conducting an audit as a preventative strategy is vital.
A good auditor will tell you whether or not you are in full compliance and whether or not your system has any severe problems. They’ll also take advice on how to remedy the problem. Conducting the audit early on could spell the difference between your firm succeeding or failing in the near future.
3. Boost Your Credit Score
If you have a successful and growing company, it is in your best interests for your bank, shareholders, and investors to be fully informed. Regular audit reports can help you maintain a positive connection with any stakeholder or financial institution with which you do business. Your business investors want to know how well your firm is doing and whether or not you are a trustworthy person.
If your bank has confirmed that you have the resources to repay the loan, they will be more ready to provide you a more reasonable loan. In their eyes, this puts you in the low-risk bracket. The same can be true for investors, who will continue to support your company if they have more faith in your financial statements.
4. Improve Your Reliability
Regular audits can create confidence in your statements and inspire assurance that everything in your firm is functioning as planned if you operate a larger company with top management or corporate investors.
Even if you’re a small business or just getting started, the trustworthiness your company projects to tax authorities will benefit you greatly. They’ll be able to draw judgments regarding your level of taxation or other matters related to their field of expertise based on your audited financial accounts.
5. Be Certain Where Your Company Is Going
You’ll have a lot more information about which elements of your organization are running properly and which ones need to be tightened up after a professional financial audit. You may be confident that you will not need to make any further adjustments to your original company plan in the areas where there are no errors. Those that reveal substantial issues, on the other hand, require a closer examination: how are they run, and how can you design an efficient plan before those seemingly little errors endanger the company?
6. Encourage accountability.
You can also use the auditor’s report to encourage management and people in your organization to be more accountable. Individual employees, after all, will be more focused on dependable accounting and management if they know the organization is audited on a regular basis. They will also be able to repair any errors in their own work while they are still minor, allowing them to improve the reliability of their work in the future.
Countrywide Didn’t Comply With HUD Rules, Audit Finds
Based on recent allegations by the agency’s watchdog that Countrywide Bank FSB underwriters used poor due diligence, the US Department of Housing and Urban Development (HUD) may pursue fraud charges.
According to a recent audit report from HUD’s Office of Inspector General (OIG), serious underwriting flaws were detected in seven of 14 randomly selected Countrywide loan files. The OIG investigated Countrywide, a Bank of America subsidiary, based on its 6.75 percent default-to-claim rate for FHA loans in the Midwest region between 2008 and 2010.
According to the report, HUD paid out more than $1 million in claims and suffered actual losses of more than $720,000 as a result of the underwriting flaws. The losses were incurred as a result of the sale of properties linked to the seven defaulted loans.
‘Countrywide did not appropriately examine, evaluate, or support borrowers’ job and income, source of cash to close, liabilities, or credit information for these seven loans,’ according to the report.
Countrywide also failed to follow HUD’s quality-control requirements and failed to examine early-payment defaults in accordance with the agency’s criteria, according to the report.
Regional HUD auditor Kelly Anderson advises that HUD’s general counsel for program enforcement prosecute Countrywide and/or its principals for falsely certifying the integrity of loan data or due diligence processes, according to the report’s conclusion. According to the study, the agency could seek redress under the Program Fraud Civil Remedies Act.
Anderson also advises that Bank of America compensate HUD for the $720,000 in losses, reimburse HUD for $3,000 in borrower fees or prove that the costs were fair and usual, implement a quality-control plan that conforms with HUD’s regulations, and evaluate all early-payment default loans.
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