A financial statement audit is a routine part of accounting and business ownership. But are you using your clients’ financial data to the fullest extent possible? Introducing more detailed data analytics to the process can improve your financial audits and help your clients succeed in both the short term and long term.
What Is a Financial Statement Audit?
During a financial statement audit, an independent accountant or auditor reviews a company’s financial records. This means reviewing balance sheets, transaction records, investment statements, and any other records that account for a company’s cash flow. Your job is to make sure all the numbers line up, that all of your client’s income and expenses are accounted for, and that the financial statements accurately and truthfully represent a company’s cash flow.
This type of audit is a great tool for preventing fraud and preparing to file taxes, but it can also be a really helpful tool for business planning. Rather than just an exercise in error elimination, an audit can be used to examine a company’s bookkeeping practices, business structure, and cash flow trends. And this is where data analytics comes in.
How Can Data Analytics Improve a Financial Statement Audit?
Incorporating data analytics into a financial statement audit is an opportunity to deepen the scope of an audit, and make the process more useful for your client. For example, a traditional financial statement audit might provide the company with a report that simply confirms its books are in order, or alternatively, shows where discrepancies appear. With data analytics, you can widen the scope of your report to offer information about a company’s financial history, client relationships, and biggest expenses or sources of revenue. You can also work with the company to find solutions for improving those metrics.
An audit already involves analyzing data, so you don’t need to reinvent the wheel. Try switching up your data collection methods, or incorporate wider data sets. Maybe you’re used to looking at transaction records over a one-year period. Why not expand your audit to include transactions over the last five years? This can be helpful if a company is having a low-profit year; a further-reaching data sample might show an overall improvement in performance, despite the temporary lull.
Understand what factors are important to a client. Is it growing their customer base? Improving cash flow? Finding ways to ethically reduce their tax bill? Whatever your client’s long-term goals, you can seek out data that offers a representation of whether the company is meeting them or is on track to meet them. If a client wants to gain more customers, look carefully at customer invoices, regular transaction records, and active income statements. You can even combine these data points with some insight into the demographics and purchasing habits of the company’s desired clientele.
Using Data Analytics to Improve Client Relationships
A lot of CEOs and business owners would say that financial statement audits are an important source of information that influences how they conduct business. As an accountant, providing advanced data analysis with your financial statement audit shows you care about a client’s long-term success, not just about confirming they’re doing everything by the books.
Demonstrating thought for the long-term financial health of your clients improves your relationships with those clients. Happy, successful business clients can mean long-term success for you as an accountant.
The next time you’re asked to conduct a financial statement audit, talk to your clients to find out if they’re willing to go a little deeper to discover more useful information about how their business is working. While it may be a bit more of a time commitment, drawing from a larger set of data and using innovative analytic techniques can go a long way toward fostering business growth.