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Top 5 Warning Signs Your Company Needs Audit Support Now!

The purpose of an audit is to get an independent, third-party opinion regarding your financial statements of your business. in short, an auditor establishes if your transactions and financial statements are accurate and in accordance with the accounting principles.

An audit is ESSENTIAL for all businesses because the authorities are always looking for possible red flags in the company’s tax returns and financial records. Hence, chances are your company can be randomly selected for an audit anytime by the local tax authorities. Therefore, if you need peace of mind, it is important to understand your company’s need for audit support.

Audit Support

5 Signs You Need Audit Support for your Business Immediately

Are you concerned about a potential error in your tax reruns? If yes, then it is time to consider audit support for your business, whether you have received an official letter from the authorities or not. If you are still confused, here are five signs to look out for that your company needs immediate audit support.

1. Low Risk: No Official Audit Letter

The first warning sign is that you have not received an official letter from the authorities, but there are possible triggers that concern you about your company’s tax returns. According to QuickBooks, there are three major concerns that may trigger an official Audit for small businesses. These red flags are:

  • Business Losses

If your business is facing constant losses, chances of an official audit are incredibly high, especially in the case of a sole proprietorship. Why? Because the authorities are suspicious that you may be taking too many deductions or personal expenses from business finances, which is not legal. You need to make sure your business expenses are valid.

  • Cash Transactions

Did you know that the credit card processors now submit all the records to the authorities, which includes your company’s total credit card transactions! Hence. The IRS matches credit card transactions with your tax returns to identify any discrepancies. Therefore, it can trigger an audit.

  • Math Mistakes

As the authorities are checking numbers in the background, you might trigger an official audit if you add up your receipts, and the numbers don’t match with the tax return. Therefore, consider going electronic or hiring an accounting firm for taking care of your numbers.

Although at this stage, you haven’t received an official audit letter from the authorities, if you are concerned about these areas, then it’s a good idea to consider audit support for your company.

2. A Correspondence Audit Letter

In case of a correspondence letter, the tax authorities request additional information from the company regarding a specific aspect of your tax return report. If you receive this letter, it means that the authorities want further proof such as invoices, transaction records, or receipts that support your tax returns.

If you receive this letter, you can simply mail the authorities the proof, and this “correspondence” will complete the audit and the request for further documentation. However, if your company does not have sufficient evidence, you would need audit support to avoid hefty penalties or business suspension.

A third-part audit firm can help you with collecting evidence requested without giving away unrelated information and business details.

3.Variable Risk

Now, as you have received an official audit letter from the authorities, your business is subject to a random audit so that the authorities can review your business accounts and tax returns. At this stage, it means that the authorities are looking to dive into your company’s finances to ensure that you are accurately submitting taxes and returns.

To avoid being subject to random audit again, prepare well for this audit to ensure that your records are accurate, and support your tax returns. Keep these things in mind:

  • An accurate, up-to-date transaction record from the last year.
  • Receipts and invoices that link to each transaction
  • Separate business and personal expenses
  • Consider hiring a top audit firm in Dubai to defend your tax returns successfully.

4. Medium Risk: Office Audit Letter

The fourth warning sign is if you receive a letter from the authorities requesting an office audit at a specified date. If you receive this letter, it is time to gather up all your financial records from the past year, including transaction records, books, invoices, and account receivables.

In such situations, the Tax Authority wants to examine your business operations and finances to identify any possible risk areas or tax non-compliance. When you receive an office audit letter, you need to gather all the required documents and visit the local authorities so they can assess your tax returns for accuracy.

5. High Risk: Field Audit Letter

The fifth warning sign that your business immediately needs audit support is when you receive an official letter for a field audit from the authorities. In this case, the authorities are requesting to visit your office to review all your operations. One reason behind this letter is that something in your company’s tax return is faulty and has triggered a red flag.

Therefore, you have received a field audit letter from the authorities. Most of the time, the authorities don’t even inform the company prior to the audit and take hold of all business records for a surprise field audit. This is a very lengthy process that involves a review of transactions, financial records, and accounting books.

If the situation is this bad, consider hiring the best audit firms to help you answer the official auditor’s questions without submitting unnecessary information.

Consult an Audit Firm Today!

These are the top 5 warning signs that show that your company is in dire need of audit support. You must never ignore these signs because if left untreated, your businesses might end up shutting down completely. But, don’t worry, a professional CPA firm in Dubai can help you mitigate the risk and represent your business to official authorities.

Consult top audit firms in Dubai today who can provide you with audit support so that you can continue running your businesses successfully.

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