Managing a business sometimes involves an independent audit. Not to be confused with the purely financial audit, an independent audit is used to prepare for such activities as the potential sale of your business or seeking financing or investor capital.

Preparing for audits can be nerve-racking and confusing. Business owners have been known to suffer anxiety attacks and even heart palpitations at the mere thought of an audit. Here are a few steps to make audit preparation less stressful and the process smoother.

For starters, this is an independent audit, not an Internal Revenue Service audit. You get to choose your auditor. Choose the right one. 

The organization you choose should have experience with, and references from, companies with similar profiles as your company. If you’re a small biotech company, choosing an auditor whose main experience is with large aerospace manufacturers probably won’t offer a good fit and could be expensive. You really don’t want to educate your auditor about your business in real-time. That education will cost you time and money with the benefits accruing to the auditor since you’re paying them while educating them. Referrals usually offer the best way to find an appropriate auditor, followed by checking references.

Make sure your documentation — both paper and digital — is complete and organized. You might even coordinate with the auditor to get a checklist of what’s needed, compile your documentation and create a “manual.”  

In addition to containing the required information, this manual could provide information about your company and any unique considerations, special risks or areas of concern. Don’t overwhelm the auditor with data, but don’t leave anything out. Your auditor is your friend — one who helps you reach an end or attain a goal, not harass or intimidate you.

Document your employees’ roles and tasks and your organization’s procedures to provide a guide to how you do things. Remember: Your documentation and procedures are new to the auditor.

Designate an employee who’s familiar with your procedures and the documentation in the manual to accompany the auditor and smooth the way by coordinating meetings and any additional documentation or data requirements.

Prepare. Gather and complete all financial and other data, reconciling balance sheets, bank statements and financial statements. Don’t waste the auditor’s time by failing to have critical information complete and readily available. If you lack expertise in areas the audit covers, bring in outside specialists in advance of the audit. This will save everyone time and save you money and aggravation.

Ask others in your network of business connections about their audit experience and suggestions. They could have a referral or two for you to contact. There’s no sense in reinventing the wheel.

Your first independent audit doesn’t have to be painful or intimidating. A little preparation goes a long way.

Disclaimer: This article is intended for informational purposes. Neither Janet Arrowood nor the Write Source are accountants, auditors or legal or tax experts. Always consult an appropriately credentialed specialist.