All businesses should have internal controls to deter fraud, detect theft, and preserve assets. Of all the assets, cash is the easiest to misappropriate. Effective internal controls for cash prevent the proverbial hand in the cookie jar.
What is an Audit?
An audit is defined as a methodical examination. Audits are grouped into two principal sets – financial and organizational compliance (usually related to licensure). For the small business entrepreneur, it is almost unheard of for them to have an organizational compliance audit. Small business audits are almost entirely financial in nature. Within the financial audit group, there are several types of audits. More than 80% of small business audits are related to tax compliance. It is more likely that the small business will be audited by the local government or the state’s department of taxation in relation to sales tax collection than an Internal Revenue Service (IRS) audit.