Corporate entities and publicly listed companies are required by law to publish their accounts at least once a year. Every company has a fiscal year-end where it is required to publish its financial statements for investors to go through. This maintains transparency between the investors and the directors of the company, who are basically agents. However, a conflict of interest arises because the investors will obviously not check everything on the financial statements. The directors have the chance to falsify the figures and statements and make it seem that the company is doing much better than it really is.
This is why companies are subjected to external audits. External auditors generally check all material figures on the financial statements, using a variety of analytical techniques and substantive procedures. Auditors are required to check everything before compiling an audit report.
The audit report expresses an opinion on the financial statements and confirms whether the figures quoted in the financial statements are correct. However, audits cost a lot of money, and often run for several months. Audits are statutory requirements, and the government might require the company to hire an external auditor in order to investigate certain contentious figures in the financial statements pertaining to the tax calculations.
Why Purchase Insurance?
Growing companies generally come under a lot of scrutiny. The tax authorities might require you to get the accounts audited again. Companies such as Accountancy Insurance offer audit protection insurance, with more than 2,500 firms across Australia and New Zealand having purchased the insurance policy.
An audit insurance policy basically covers all expenditures pertaining to any official enquiry or investigation that’s carried out by the authorities. In growing companies, this is a major concern. For instance, if the tax authorities don’t agree with the figures in the statements and feel that they are falsified, they might ask you to hire an external auditor to give an opinion on the financial statements. This could derail your company’s profit estimations completely, making it difficult for you to attract investors. However, if you have audit protection insurance from a reputable firm such as Accountancy Insurance, you don’t have to worry about a lot. The company will foot the costs of any expenditures pertaining to the enquiries and investigations.
Buying an Audit Insurance Policy
Purchasing an audit insurance policy isn’t as difficult as it may seem. You can contact the company in order to get a tailored quote. The insurance company will obviously want to mitigate its risk as much as possible. As a result, it will incorporate a series of different factors into the calculations. For instance, the premium will vary depending upon the performance of your company in the past. If your company has been targeted by tax authorities in the past and is likely to be targeted again, the premium will obviously be higher. You should ideally request quotes from two or three different insurance companies before making a decision about the best audit insurance policy to buy.