What is Auditing?

Auditing typically refers to financial statement audits or an objective examination and evaluation of a company’s financial statements – usually performed by an external third party. Audits can be performed by internal parties and a government entity, such as the Internal Revenue Service (IRS).

Importance of Auditing

Audit is an important term used in accounting that describes the examination and verification of a company’s financial records. It is to ensure that financial information is represented fairly and accurately.

Also, audits are performed to ensure that financial statements are prepared in accordance with the relevant accounting standards. The three primary financial statements are:

1. Income statement
2. Balance sheet
3. Cash flow statement

Financial statements are prepared internally by management utilizing relevant accounting standards, such as International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). They are developed to provide useful information to the following users:

• Shareholders
• Creditors
• Government entities
• Customers
• Suppliers
• Partners

Financial statements capture the operating, investing, and financing activities of a company through various recorded transactions. Because the financial statements are developed internally, there is a high risk of fraudulent behavior by the preparers of the statements.

Without proper regulations and standards, preparers can easily misrepresent their financial positioning to make the company appear more profitable or successful than they actually are.

Auditing is crucial to ensure that companies represent their financial positioning fairly and accurately and in accordance with accounting standards.

Types of Audits

There are three main types of audits:

1. Internal audits

Internal audits are performed by the employees of a company or organization. These audits are not distributed outside the company. Instead, they are prepared for the use of management and other internal stakeholders.

Internal audits are used to improve decision-making within a company by providing managers with actionable items to improve internal controls. They also ensure compliance with laws and regulations and maintain timely, fair, and accurate financial reporting.

Management teams can also utilize internal audits to identify flaws or inefficiencies within the company before allowing external auditors to review the financial statements.

2. External audits

Performed by external organizations and third parties, external audits provide an unbiased opinion that internal auditors might not be able to give. External financial audits are utilized to determine any material misstatements or errors in a company’s financial statements.

When an auditor provides an unqualified opinion or clean opinion, it reflects that the auditor provides confidence that the financial statements are represented with accuracy and completeness.

External audits are important for allowing various stakeholders to confidently make decisions surrounding the company being audited.

The key difference between an external auditor and an internal auditor is that an external auditor is independent. It means that they are able to provide a more unbiased opinion rather than an internal auditor, whose independence may be compromised due to the employer-employee relationship.

There are many well-established accounting firms that typically complete external audits for various corporations. The most well-known are the Big Four – Deloitte, KPMG, Ernst & Young (EY), and PricewaterhouseCoopers (PwC).

3. Government audits

Government audits are performed to ensure that financial statements have been prepared accurately to not misrepresent the amount of taxable income of a company.

Within the U.S., the Internal Revenue Services (IRS) performs audits that verify the accuracy of a taxpayer’s tax returns and transactions. The IRS’s Canadian counterpart is known as the Canada Revenue Agency (CRA).

Audit selections are made to ensure that companies are not misrepresenting their taxable income. Misstating taxable income, whether intentional or not, is considered tax fraud. The IRS and CRA now use statistical formulas and machine learning to find taxpayers at high risk of committing tax fraud.

Performing a government audit may result in a conclusion that there is:

1. No change in the tax return
2. A change that is accepted by the taxpayer
3. A change that is not accepted by the taxpayer

If a taxpayer ends up not accepting a change, the issue will go through a legal process of mediation or appeal.

What Is a Business Consultant?

‌A business consultant is an individual who works closely with business owners and managers who want to improve operations and efficiency, grow their businesses or maintain existing positive trends. 

Business consultants act as partners in identifying and overcoming the obstacles that arise along a company’s path to meet its goals.

What Does a Business Consultant Do?

There are consultants who specialize in specific industries, while others take a more general approach. Specific services vary by consulting firm, but here are some of the most common responsibilities of a consultant:

• Identify obstacles preventing growth or efficiency
• ‌Pinpoint opportunities for change and help implement changes
• Provide training and resources to staff and management
• Bring out-of-the-box ideas to refresh processes or establish workflows
• Assist in business planning and creating new businesses
• Assess, hire and fire staff as necessary
• Implement new programs
• Analyze a company’s budget, suggest adjustments and implement suggestions
• Locate vendors and partners

Career Outlook for Business Consultants

In 2023, both business consulting and management consulting are projected to continue growing as firms meet the demands of newly remote businesses and the demand for specialized advice. Some consulting firms are experimenting with digital productization and personalized data to gain a competitive edge.

‌An individual business consultant’s earnings depend on several factors, including their location, the industries they serve and the mix of consulting skills they bring to the table. Generally speaking, a consultant in the US makes between $45,000 and $95,000 per year.

DID YOU KNOW? Today’s consulting grads are drawn to firms that frequently upskill managers, offer professional development and stay conscious of organizational culture. 

What Kinds of Businesses Need a Consultant?

Nearly any business can benefit from hiring a business consultant. Here are a few examples of scenarios in which a consultant might assist in various stages of growth or facing a range of challenges.

• Startups can complete the planning phase and get a strong initial boost using third-party data analysis.
• Growth-stage businesses can access a fresh perspective as they advance and try out new strategies.
• ‌Organizations that are not meeting their financial goals can dig deeply into their accounting history and practices.
• ‌Companies adding a new department can get support with setup and staffing.

What Are the Advantages of Business Consultants?

Having gathered insights and expertise from many clients and industries, consultants often have more and different resources than internal employees. Their “bird’s eye view” can complement the experience of seasoned business managers and owners. An outsider is often better at pinpointing strengths or weaknesses than someone entrenched in a business. 

There are some cases in which consultants can also make processes much faster. Especially when a team is building a new campaign or business plan, a consultant can come in with clear steps and assignments right away. Many also have a strong network of service providers and external resources.

Whether the focus is a budget adjustment, a sales revamp or a marketing initiative, business consultants tend to generate a wealth of creative solutions. 

What Tools Do Business Consultants Use?

‌Being a business consultant requires a lot of planning, researching and organizing. The right tools can help consultants perform at their best. Below are five of the most important categories of tech in consulting.

1. CRM Software

‌CRM software is for more than keeping track of client information and interactions, sharing files and tracking lead progress. With accurate data attached to a client record, it should ultimately help develop strong relationships and support accurate internal and external communication.

2. Proposal Software

‌Consultants send business proposals regularly, so using a platform that provides templates can save hours. Proposal software also maintains consistency in branding and style.

3. Project Management Tools

‌Most business consultants manage several different clients at a time — and multiple projects for each client. Ideally, they need project management tools built to support client-based businesses. ‌

4. Time-Tracking Tool

‌A business consultant typically charges by the hour, so keeping up with billable hours is a foundational aspect of consulting. Moreover, these hours need to be tracked per client and per project. 

5. Cloud Automation Software 

‌Automated work management software like Accelo can streamline your workflow and simplify your days. By integrating current apps into a single platform, business consultants can easily manage sales, projects and more — no matter where they are. 

What is Financial Services?

Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises. Financial services companies are present in all economically developed geographic locations and tend to cluster in local, national, regional and international financial centers such as London, New York City, and Tokyo.

Importance of Financial services

It is the presence of financial services that enables a country to improve its economic condition whereby there is more production in all the sectors leading to economic growth.

The benefit of economic growth is reflected on the people in the form of economic prosperity wherein the individual enjoys higher standard of living. It is here the financial services enable an individual to acquire or obtain various consumer products through hire purchase. In the process, there are a number of financial institutions which also earn profits. The presence of these financial institutions promote investment, production, saving etc.

Hence, we can bring out the importance of financial services in the following points:

Importance of Financial Services

• Vibrant Capital Market.
• Expands activities of financial markets.
• Benefits of Government.
• Economic Development.
• Economic Growth.
• Ensures Greater Yield.
• Maximizes Returns.
• Minimizes Risks.
• Promotes Savings.
• Promotes Investments.
• Balanced Regional Development.
• Promotion of Domestic & Foreign Trade.

Promoting investment

The presence of financial services creates more demand for products and the producer, in order to meet the demand from the consumer goes for more investment. At this stage, the financial services comes to the rescue of the investor such as merchant bankers through the new issue market, enabling the producer to raise capital.

The stock market helps in mobilizing more funds by the investor. Investments from abroad is attracted. Factoring and leasing companies, both domestic and foreign enable the producer not only to sell the products but also to acquire modern machinery/technology for further production.

Promoting savings

Financial services such as mutual funds provide ample opportunity for different types of savings. In fact, different types of investment options are made available for the convenience of pensioners as well as aged people so that they can be assured of a reasonable return on investment without many risks.

For people interested in the growth of their savings, various reinvestment opportunities are provided. The laws enacted by the government regulate the working of various financial services in such a way that the interests of the public who save through these financial institutions are highly protected.

Financial Services offered by various financial institutions

• Factoring.
• Leasing.
• Forfaiting.
• Hire Purchase Finance.
• Credit card.
• Merchant Banking.
• Book Building.
• Asset Liability Management.
• Housing Finance.
• Portfolio Finance.
• Underwriting.
• Credit Rating.
• Interest & Credit Swap.
• Mutual Fund.

Minimizing the risks

The risks of both financial services as well as producers are minimized by the presence of insurance companies. Various types of risks are covered which not only offer protection from the fluctuating business conditions but also from risks caused by natural calamities.

Insurance is not only a source of finance but also a source of savings, besides minimizing the risks. Taking this aspect into account, the government has not only privatized life insurance but also set up a regulatory authority for the insurance companies known as IRDA, 1999 (Insurance Regulatory and Development Authority) .

Maximizing the Returns

The presence of financial services enables businessmen to maximize their returns. This is possible due to the availability of credit at a reasonable rate. Producers can avail of various types of credit facilities for acquiring assets. In certain cases, they can even go for leasing of certain assets of very high value.

Factoring companies enable the seller as well as the producer to increase their turnover which also increases the profit. Even under stiff competition, the producers will be in a position to sell their products at a low margin. With a higher turnover of stocks, they are able to maximize their return.

Ensures greater Yield

As seen already, there is a subtle difference between return and yield. It is the yield that attracts more producers to enter the market and increase their production to meet the demands of the consumer. The financial services enable the producer to not only earn more profits but also maximize their wealth.

Financial services enhance their goodwill and induce them to go in for diversification. The stock market and the different types of derivative markets provide ample opportunities to get a higher yield for the investor.

Economic growth

The development of all the sectors is essential for the development of the economy. The financial services ensure equal distribution of funds to all the three sectors namely, primary, secondary, and tertiary so that activities are spread over in a balanced manner in all the three sectors. This brings in a balanced growth of the economy as a result of which employment opportunities are improved.

The tertiary or service sector not only grows but this growth is an important sign of the development of any economy. In a well-developed country, the service sector plays a major role and it contributes more to the economy than the other two sectors.

Economic development

Financial services enable consumers to obtain different types of products and services by which they can improve their standard of living. Purchase of car, house, and other essential as well as luxurious items is made possible through hire purchase, leasing, and housing finance companies. Thus, the consumer is compelled to save while he enjoys the benefits of the assets that he has acquired with the help of financial services.

Benefit to Government

The presence of financial services enables the government to raise both short-term and long-term funds to meet both revenue and capital expenditure. Through the money market, the government raises short-term funds by the issue of Treasury Bills. These are purchased by commercial banks from out of their depositors’ money.

In addition to this, the government is able to raise long-term funds by the sale of government securities in the securities market which forms a part of the financial market. Even foreign exchange requirements of the government can be met in the foreign exchange market.

The most important benefit for any government is the raising of finance without offering any security. In this way, financial services are a big boon to the government.

Expands activities of Financial Institutions

The presence of financial services enables financial institutions to not only raise finance but also get an opportunity to disburse their funds in the most profitable manner. Mutual funds, factoring, credit cards, and hire purchase finance are some of the services which get financed by financial institutions.

The financial institutions are in a position to expand their activities and thus diversify the use of their funds for various activities. This ensures economic dynamism.

Capital Market

One of the barometers of any economy is the presence of a vibrant capital market. If there is hectic activity in the capital market, then it is an indication of the presence of a positive economic condition. The financial services ensure that all the companies are able to acquire adequate funds to boost production and to reap more profits eventually.

In the absence of financial services, there will be paucity of funds which will adversely affect the working of companies and will only result in a negative growth of the capital market. When the capital market is more active, funds from foreign countries also flow in. Hence, the changes in the capital market are mainly due to the availability of financial services.

Promotion of Domestic and Foreign Trade

Financial services ensure the promotion of domestic as well as foreign trade. The presence of factoring and forfeiting companies ensures increasing sale of goods in the domestic market and export of goods in the foreign market. Banking and insurance services further contribute to stepping up such promotional activities.

Balanced Regional development

The government monitors the growth of economy and regions that remain backward economically are given fiscal and monetary benefits through tax and cheaper credit by which more investment is promoted. This generates more production, employment, income, demand and ultimately increase in prices.

The producers will earn more profits and can expand their activities further. So, the presence of financial services helps backward regions to develop and catch up with the rest of the country that has developed already.