Is Audit done just to meet tax requirements?

 An audit is carried out to comply with Income Tax.

This is the common understanding we find among the Nepalese business community. It is true but not 100%. The audit does help in getting the tax returns and their supporting schedules error-free & accurate but the main purpose of the audit is to:

1) Ensure Statutory compliance.

2) Identify Internal Control Weaknesses & get recommendations from experts to improve on it.

3) Improve processes to ensure efficiency and effectiveness.

4) Build capacity of the staff & those involved in the process as they get the chance to interact & learn from them the best in the field.

Well, but how to ensure all the purposes are met & ensure that audits are being done for the sake of audit. How to turn it into an opportunity to learn more and use it a driver for constantly evolving change? In other words, how to get more out of the Audit Process? Here's what you can do to get better out of the process:

Photo credit: @creativevisionprodukcija

1) Make everyone understand that audit is not just for the finance/accounts department. It is for the organization as a whole. It should be made clear that everyone in the organization has shared responsibility although finance can lead/facilitate the process.

2) Request auditors to submit an audit plan and agree on the support required. It will help you monitor the number of days, person & thereby, assisting you in managing the cost & better plan internal resources.

3) Always ask auditors to do a risk review before starting actual fieldwork. This helps you to get familiarized with industry practices/standards while auditors will be able to set their audit approach including sampling requirements.

4) Always have auditors issue a Management Letter. Management Letter contains the issue/observation found during the fieldwork along with the risk level & recommendation to improve on it. In fact, this can be one of the tools to measure departmental performance.

5) Conduct Entry and Exit Meeting including all relevant stakeholders (if not all at least senior management team). This is an opportunity to lay down expectations, have a discussion with auditors around the preliminary findings & areas that require additional controls especially with industry best practices, existing and upcoming business & regulatory environment.

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