30 Nov What is Audit Readiness Assessment?
What is an Audit Readiness Assessment?
An audit readiness assessment is a comprehensive checklist designed to evaluate how prepared a company is for an audit. It typically covers common deductions and potential audit situations. For instance, the process would begin with reviewing employee and subcontractor documentation, ensuring that everything required is in order. Additionally, the assessment includes verifying standard tax deductions, such as travel, mileage, and meals, which are often the largest. We ensure receipts, justifications, and tax journals are correctly maintained for these deductions.
On the financial audit side, we would verify that invoices or sales receipts are available for every payment and bills or purchase receipts are available for every expense. We also check that documentation is complete for any assets purchased or loans taken. Lastly, we confirm that bank and credit card statements are available for the audit period and reconciled monthly with their respective accounts.
Importance of Audit Readiness
The main benefit for the client is identifying any gaps or vulnerabilities in their records. This helps them understand where their risks lie if they were to face any of those types of audits. By spotting these issues ahead of time, the client can take steps to address them and be better prepared, minimizing potential audit risks.
Role of Technology in Audit Readiness
Technology plays a crucial role in audit readiness. Fantastic apps now allow you to store receipts, bills, and other important documents electronically, eliminating the need to keep paper copies. For instance, we use MileIQ to track mileage for deductions. For meals, we attach receipts directly to transactions in QuickBooks, making it easy to pull up both the receipt and its justification. The same process applies for travel expenses.
Additionally, apps like Bill.com, Gusto, and QuickBooks Payroll allow you to pay employees and 1099 subcontractors while storing their certificates of insurance, W9s, and master agreements within their profiles. This makes documentation easily accessible when needed for audits.
How I Can Help
When you work with Foundation Accounting & Consulting, we integrate everything with QuickBooks as much as possible, and we also use additional apps to track travel, mileage, and meals. A receipt alone is not always enough—you need proper justification to back up those receipts. We ensure you gather that documentation throughout the year so that you can claim as many deductions as possible when tax time comes.
Conclusion
An audit readiness assessment is a proactive approach to ensuring your business is fully prepared for any audit. You can minimize risks and avoid costly mistakes by reviewing critical areas such as employee documentation, tax deductions, and financial records. With technology integration, managing and accessing essential documents becomes streamlined, further enhancing your audit preparedness. At Foundation Accounting & Consulting, we help you implement these best practices, ensuring your records are organized, deductions are maximized, and your business is audit-ready year-round.
