Although companies generally dread audits, conducting independent or internal audits may be beneficial in terms of identifying problems before someone else does – especially when applying for loans, according to The Record.
Whether lenders require audits depends on the amount of capital to be raised, the quality and availability of collateral, the individual company's history and several other variegated factors. In order to determine whether an audit is necessary, companies should determine what prospective lenders' specific prerequisites are.
Businesses that have the flexibility to decide carry out what are termed as discretionary audits – investigations that were not commissioned as a result of a request by the IRS, another federal agency or a lending institution. In this case, the paper points out, they can shop around in order to assess which firm offers the best and most cost-effective audit solutions.
In addition to audits, businesses have the option to review financial statements. Although reviews do not submit statements to the same in-depth analysis as audits, reliability is still increased as a result, which may be all that is required by a lender.
An audit conducted by the national Concerns of Police Survivors group on its Indiana chapter recently found that the chapter had failed to report a $1 million gift to the IRS, in addition to identifying negligence, mismanagement and insufficient documentation, according to the Chicago Tribune.