A company is responsible for keeping careful track of its expenses, income, and the value of its assets, and many in-house employees may be hard at work to keep the numbers correct. For a smaller business, a bookkeeper may be used to log and track expenditures, purchases, and income alike to determine the company’s overall profits or losses. This information may help a manager determine how to spend their money or conserve it, and for a larger business, tax accounting firms are vital for business tax season. A larger company will have bookkeepers too, but local accounting firms can and probably will be hired by client companies to look over their finances. Meanwhile, business advisory services and international tax services may include corporate audit and assurance services in their work, and corporate audit and assurance services will help keep the numbers straight. Companies who work with foreign nations such as China may perform international auditing work, and Chinese accounting firms may help with this, along with other business advisory services in China.
Auditing is, for those unaware, is the act of reviewing a company’s or even a wealthy individual’s expenses, current bank accounts, profits, and any other money-related matters to get a clear overall picture. Put simply, it is an examination of all money-related matters. Small companies may get great use out of corporate audit and assurance services as they grow, and large companies may regularly need them because they are highly diverse and far-reaching. Today, the U.S. Bureau of Labor Statistics shows that nearly 1,397,700 accountants and auditors work in the United States, showing just how robust and important this business is. This is hardly new, either; even the ancient Mesopotamian peoples practiced auditing to some capacity, where accountants kept track of taxes being paid in sheep and produce for religious temples there. Today, livestock is hardly involved in audits; rather, possibly millions or even billions of dollars of assets, taxable income, and more will be examined by relevant corporate audit and assurance services.
A company may start small and have a dedicated line of work, but as such a company grows, its profits may increase and the company may start to diversify over time. This means that overall income and expenses may become difficult to track across different fields, so an auditor can, put simply, keep everything organized and on track to measure monetary matters. This may become especially important as a business starts working overseas and has foreign partners cor clients. All the same, the bulk of IRS auditing work focused on larger entities in 2017, for a recent example. For that year, businesses who had balance sheets over $20 million in value had an audit rate of 60% or so. This towers over individual taxpayers who reported under $200,000 in income that year, and they had an audit rate of only 0.5%.
Why might a company choose to be audited, or have an audit forced upon it? Sometimes, an audit may be imposed on a company for reasons such as during a bankruptcy trial case or a criminal investigation for white-collar crime. Some employees in a company behave dishonestly and may secretly pocket company money for themselves, known as embezzling. In other cases, a stockbroker or other worker may lie or distort data about stock values or investment matters, and fool investors and other parties into using money in ways that they normally would not. These are serious crimes, and may involve an audit on the company and/or the suspected individual in some cases.
In other cases, a company will ask for an audit, such as right before business tax seasons, to ensure that the company is paying the correct taxes based on its income and liabilities alike. This may be helpful for large and diverse companies, where tracking such data with in-house labor may be difficult. An audit will ensure that the company does not illegally pay to little in taxes or pay too much. A company boss may also ask for an audit to determine whether their income and profits allow for certain business plans to be implemented. A business may sabotage itself if it tries something that it actually cannot afford to do.