An audit is when someone examines your financial statements to determine if they're faithful representations of what your business has been doing. You can usually do them in-house. However, people tend to think of audits as accounting services offered by independent accounting firms for good reasons. Either way, you should know that an audit can give you incredible benefits. As a result, it's something to be embraced.

Ensure Compliance

This is the best-known benefit of hiring audit services. There are rules on how businesses are supposed to do their accounting. Failure to comply means facing fines and other penalties. For instance, the IRS charges 20 percent of the tax underpayment on those who fail to follow the relevant tax laws. You have strong incentives to comply with the rules on how your business is supposed to do its accounting. An audit from an independent accounting firm is an excellent way to ensure full compliance.

Pinpoint Ways to Improve

Accounting isn't a perfect science. The real world is complex. Due to this, you can account for some transactions in different ways while remaining within the rules.

To name an example, businesses often don't keep track of the exact inventory items that have been bought and sold. You can do this with cars and other large, expensive objects. However, you can't do so with something like supermarket produce unless you're willing to spend an impractical amount of resources. Instead, businesses tend to account for inventories using the FIFO or the LIFO method. The first assumes that earlier-bought items are sold first, while the second is based on the opposite. FIFO is the default because it's the more intuitive method. Even so, you can use LIFO with permission from the IRS. Both have their upsides and downsides, thus making them an excellent example of the complexities in accounting.

Skillful auditors can identify parts of your accounting that can be improved. This enhances your ability to monitor your business's operations. Better still, this can increase the accuracy and timeliness of your financial statements, thus making them that much more helpful as guides for your decision-making.

Borrow the Auditor's Credibility

Sometimes you have to submit your financial statements to other parties. For example, you might be seeking a loan. Alternatively, you might be convincing someone to invest in your business. Whatever the case, you want your financial statements to be as credible as possible when you do so. Audits are an easy way to borrow the auditors' credibility. This is because accounting firms are staking their reputations whenever they declare that a business's financial statements are trustworthy. As such, your financial statements become more credible when you pass audits, similar to how your tax return becomes more reliable when you seek professional tax return preparation services.

Reach out to local accounting services to learn more.