Why mining & resources business owners need to consider audit in their business strategy.
Most business owners consider audit a compliance requirement for Government legislation, and sometimes it is. However, its real value lies in the confidence it can bring in terms of business financial security, improving profitability, efficiencies and productivity, as well as the opportunities for satisfying banks when seeking finance and attracting investors for business expansion.
In this article, guest author Matthew Monaghan, Director for Audit & Assurance at William Buck Brisbane, explores the role of audit in business strategy for achieving better, more profitable business outcomes. An audit, by definition, is an examination of financial information and records by a qualified professional who provides an opinion on whether financial information is true and fair.
There are many reasons why a business would require an audit. It might be a constitutional requirement of the company, but more commonly, it’s a requirement by stakeholders such as the business owners, directors and investors. These stakeholders rely on audits to let them know their money (often large sums of it) is being properly managed.
For growth businesses, an audit is an important aspect of starting the IPO (Initial Public Offering) process, while established businesses often use audits to do better – increase efficiencies, improve profitability or for getting exit ready.
Here I refer to audits that are relevant for mining and resources business owners as part of a well-considered business strategy:
Agreed procedures & specific engagement audit
This is a specific type of audit conducted for a particular purpose at the request of a director or manager. These types of audits have no ATO or legislative obligation, they are both a best practice process within a business strategy and an opportunity to identify issues or improvements.
Audits of this nature are often completed during key cycles in organisations. For mining and resources businesses, which have complexity and often unique-to-industry circumstances, these audits verify what’s working well as well as exposing problems. When it comes to the latter, system inefficiencies are commonly highlighted along with potentially more insidious matters that can include misappropriation of monies.
Procedural and special engagement audits check controls and procedures used in the organisation, unearth and investigate anomalies and provide advice and recommendations.
Illegal issues aside, audit quickly and effectively provides opportunity for improvements that can contribute directly to improved outcomes, especially in the everyday transaction areas of payroll, purchasing and revenue.
For other companies, procedural audit involves attending to stocktake, checking both the counting performed by staff and the procedures used in the count, as well as making any improvements for recommendations.
These are all matters that, if left unchecked, can add up to significant and unnecessary expense that can adversely affect profitability.
External audit of financial statements
From the perspective of someone about to invest money in your organisation, an external audit is paramount. If it were you making a similar investment, wouldn’t you want confidence in the figures you’ve been presented, knowing they’ve been checked and verified by a qualified and independent auditor?
The key purpose of an external audit is to attest to the financial position of the business.
While mandatory, the number one reason behind the requirement for a listed company to have an audit is the financial confidence it brings. It’s also a compelling reason for smaller businesses with aspirations of growth.
I am currently working with a business that has no audit obligation, however as the owners are looking to grow, they understand presenting prospective investors with audited financial statements adds financial credibility.
Audit, while it has a standalone role for complying with legislation, it also has a key role in business strategy. Audit helps to deliver financial transparency, security and stability that contributes to successful business outcomes and, in turn, prosperity for business owners.
Should you have any questions about the role of audit in business strategy please contact Resources Unearthed on+61 (0) 7 3007 2000 or email firstname.lastname@example.org
Matthew is completely dedicated to his clients and enjoys using numbers to provide powerful problem-solving solutions.
Since commencing as a graduate and progressing throughout the firm over twelve years, Matthew has gained a wealth of experience in undertaking the external audits of a wide range of businesses. Matthew is completely dedicated to actively helping his clients and his colleagues, he also likes to keep active and recently participated in a half marathon.
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in the mining and resources sectors.
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