Who Needs Them and Why

A financial audit helps business owners understand how their business operates, uses money, and assumes risk. This understanding is crucial to the success of any business, regardless of its size. Audits involve a thorough examination of a company’s financial statements. The information collected can be used to prove to stakeholders that a business’s financial practices are sound. Audits can also be used to help companies obtain a small business loan.

The answer as to whether or not a small business should conduct a financial audit depends on a number of factors. It’s important to understand these factors before making this important decision. The following are the top reasons your small business might need a financial audit:

Lender Requirements

One of the top reasons small businesses conduct financial statements audits is to obtain or renew a loan. Some lenders require an audit to determine eligibility for bank loans, lines of credit, and other types of loans. Even if it’s not required, a financial audit might make obtaining a loan easier and help lower interest rates.

Partnership or LLC 

Investors today have extremely high expectations. Regular financial audits are often required as part of a business’s Partnership or LLC agreement.

Selling 

For companies looking to sell, financial audits can help make the process smoother. The information provided by an audit can help provide a clear financial picture to potential buyers and also help owners assess the selling price of their business.