Don’t Fear The Audit: A former big 4 auditor discusses how to prepare
Audits aren’t something to fear — they are just tools to help you see your business from an outside perspective. An independent CPA gives you an objective opinion on your company’s processes. They want to figure out if your finances align with Generally Accepted Accounting Principles (or GAAP). Auditors aim to evaluate and compare company finances under one set of standards and principles.
Many major life events for a company require audits, such as getting acquired or raising a new round of funding. But before your audit begins, try to imagine it as a good thing for you and your company. An audit is a legitimization of your business. It’s a stamp of approval for the internal managing of finances. An unbiased analysis of the systems your company uses to track finances is a good thing.
Advice from a former auditor
Erik Zhou spent 11 years on the audit team at PwC before joining Brex. "We do a lot more audits over the controls. "We're not looking at the numbers in a company, but your process for how you got to those numbers," he said.
Transparency issues arise when only one person handles these controls. Whether the person is in IT or accounting doesn't matter — there has to be some oversight into the process. These approval flows ensure everyone involved is ethical in their choices.
Much like an audit, approval flows are your friend. "It's essential to implement an approval flow even if there are only two people in the company. NetSuite allows for different controls within the company. Erik said, "When I get an invoice, it doesn't hit the books right away. Another person reviews and approves the invoice and then pushes the amount to the journal entry."
The benefits of an audit
Save yourself from anxiety by putting preventable measures in place before something goes wrong.
“Perspectives on risk are inherently different,” Erik says. “People have degrees of risk tolerance, and people think of risk levels in different ways.” He says risk level evaluation is something done in conversations between clients and firms. Thinking ahead and putting controls in place decreases your exposure to problems.
There will be differences here and there when the audit is complete. But when the right controls are in place, you shouldn’t worry about the process or outcome. Going through an audit will inspire confidence to your investors and partners. More rigorous approval flows will add to the transparency of your company. Emphasizing the internal workings of the company lends credibility. It’s is a health check on your finances — be aware, get prepared, and succeed.
We chose to go through our first audit with EY, one of the Big 4 auditors. Even though we were early stage, we knew the stamp of approval that comes from a big 4 audit lends credibility. We prepared by going over controls and approval flows. When the audit was complete, we were thankful for the process and clarity it brought to Brex.