Did you know that there are over 221,512 auditors currently employed in the United States?

If you own a company, you already have enough pressure on you. You want to focus on growing your business and making money for yourself and your team.

Yet, if your business is required by law to have external audits, you now have a new headache.

What is an audit? Why do companies have them? What do you do if your business needs an audit?

Read on to learn about audits, their requirements, and how to produce an audit.

Public Companies

Public companies are businesses that must have external audits. Independent auditors conduct these audits. They review the company’s financial statements to ensure they are accurate.

External audits work annually and are essential to public company disclosure. The purpose of the audit is to protect shareholders from fraudulent activity. They also provide them with information about the company’s financial health.

Private Companies

External audits are not required for private companies in the United States. Many private companies choose to have an external audit to provide transparency.

An external audit provides an independent assessment of a company’s financial statements. Many private companies feel that an external business audit reassures their stakeholders. Their financial statements are accurate and free from material misstatement.

Limited Liability Companies

A limited liability company (LLC) is a business structure that provides little liability protection to its owners.

LLCs are not required to have an external audit, although they may choose to do so. Many LLCs are “S-Corps,” which means they have elected to be taxed as a corporation. While S-Corps are not required to have an external audit, they may be subject to auditing by the IRS.

Corporations

An external audit is a goal review and assessment of a corporation’s financial statements. An external audit aims to assure that a corporation complies with laws and regulations. They also check if the financial statements are accurate and free of material misstatements.

External audits are conducted by independent auditors who the corporation hires. They help ensure that a corporation uses its resources most efficiently and effectively possible.

Not-for-Profit Organizations

Not-for-profit organizations must have an external audit to maintain their tax-exempt status. This means they must have an independent accounting firm examine their finances. It ensures that they operate within the law’s bounds.

Additionally, external audits help ensure that not-for-profit organizations use their funds in line with their stated mission and goals.

Public Credibility Objectives

The Sarbanes-Oxley Act of 2002 requires that all public companies have their financial statements audited by an independent public accountant. The Act’s purpose is to restore public confidence in the financial markets. It provides new standards for all public companies.

If you are looking for more guidelines about the external audit, visit this checklist for more information.

Importance of External Audits

External audits are must-have for businesses to maintain transparency and accountability. These audits check the business’s financial statements. It helps to detect any potential fraudulent activity.

In addition, companies that are subject to government regulation may also undergo an external audit.

Be sure to check out our blog for more tips and advice!