An auditor who understands your business and industry can address your specific risks.
Key takeaways
An experienced auditor can be a source of tactical insight and practical business knowledge.
An established auditor can provide insights and referrals as your business needs evolve.
An audit can serve as much more than simply a check-the-box exercise for private companies. In addition to evaluating financial controls and providing assurance over financial statements, an audit—and, perhaps more importantly, a strategic relationship with an experienced audit firm—can help private company leaders identify ways to increase efficiency, reduce risk, and improve overall business operations.
While maintaining our objectivity in accordance with independence guidelines applicable to private companies, RSM can share knowledge that private company leaders can act on. Here, we highlight five ways private companies can unlock strategic value from the audit process, including examples of how these themes have come to life in some of RSM’s recent engagements with private companies.
Tap into deep industry knowledge
Working with an auditor who truly understands your business and has a deep background in your sector allows you to learn more about industry best practices and leverage them to improve your company. An auditor’s industry know-how can help ensure your audit is tailored to address your business’s specific risks and is, therefore, as effective and efficient as possible. In addition, developing a strategic relationship with the right auditor can guide you through your audit process and throughout your organization's life cycle.
Example
During a recent RSM audit of a private company in the consumer products industry, we discovered the company was struggling to identify the appropriate steps to mitigate the supply chain disruptions it was experiencing. Because the company was facing so many issues and potential solutions, they weren’t sure where to focus their time and investment dollars.
RSM helped them understand not just which technologies may be beneficial but how other similar organizations were using those technologies. As a result, the company was able to make more informed decisions about the investments needed to help navigate the challenges they were facing.
Understand and control risks
Bringing on the right audit firm means bringing on auditors and other professionals with deep knowledge of the complexities of accounting practice and tax matters. Your auditor will gain an understanding of your financial structure and business practices and use their experience to assess and communicate potential hazards you may be facing—and you can head them off.
Example
During the audit for a retail company with significant gift card activity, RSM reviewed the escheatment laws that applied to their issued gift cards to determine the appropriate liability. Based upon prior experiences with retail clients, RSM also inquired about other potential state escheatment issues, which led to the identification of additional potential liabilities that the company was not aware of. This review allowed the company to self-correct and avoid potential penalties and additional costs.
In addition, the company was in the process of negotiating a transaction, and the identification of this issue allowed them to settle the matter and avoid a potentially larger impact on the valuation of the company had the amount not been known.
Explore growth opportunities
An experienced auditor will have worked with many other companies at various stages of growth in a given business segment. This auditor will have a broad view of the range of strategies deployed across an industry—and how they work. This knowledge can be an invaluable source of tactical insight and practical business knowledge.
Example
A recent RSM audit for a manufacturer of hardware products resulted in a conversation around the company's strategy to begin selling directly to consumers. The company formerly only sold its products through big-box retail stores.
Based upon previous experiences with similar businesses embarking on a business and digital transformation journey, RSM brought experienced professionals into the discussion to share best practices and assist with the company’s direct-to-consumer strategy execution.
Right-size your resourcing
An audit firm with experience and a strong reputation can be an important source of insight and referrals as your business needs evolve, which may include expanding with outsourced consultants or managed services. The firm can connect you with industry specialists, facilitate introductions, help you work through costing and estimates, and increase your confidence in the process.
Example
A private company in the life sciences industry recently leveraged its RSM-led audit process to reexamine its resourcing strategy. RSM’s auditors brought to light insights that helped the company identify the right combination of technology, outsourcing, and managed services and identify trusted providers with industry expertise. The auditors’ knowledge gave the company greater understanding and confidence as it assessed pricing, reviewed contracts, and managed the overall process.
Improve operational efficiency
Your audit firm will systematically review your existing financial processes and accounting practices. An experienced auditor will be able to identify areas of strength and weakness and ways for you to optimize your financial process.
Example
During a recent RSM audit, a private company identified where its internal financial controls needed reinforcing, leading it to reorganize its finance team to operate more efficiently. The company tightened its accounting procedures, resulting in a more efficient monthly close process.
Differentiate with strategic value
By approaching the audit process as an opportunity for improvement and strategic insight, a private company can extract significant value beyond simple compliance. This value can positively affect a company’s operational effectiveness, efficiency, and potential for long-term success.
When a company’s audit firm has deep knowledge of their industry and provides access to experienced leaders and eminent professionals, the company can apply those insights to optimize their business operations and take a faster path toward meeting their strategic goals.
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