An audit is a process of examining individuals or businesses’ financial records for accuracy. It is considered a high-stake process because of the internal revenue system audit to determine whether a business is paying enough taxes. A pre-audit is a part of the auditing process.
What is a pre-audit?
In the auditing process, the pre-audit is the first step. In a pre-audit process, the company or business’s financial documents are checked to ensure that all the provided information is correct before this record goes for the audit process. Sometimes, companies’ employees conduct the pre-audit process, and sometimes, companies hire an independent organization to check financial records.
The pre-auditing process may be conducted for a single instance or continue throughout the year to keep a finance check.
Segregation of duties
The important element in the pre-auditing process is the segregation of duties for finances. For example, you should give payroll check duty to different persons instead of one who approves time cards. You must not assign cash deposit duty to the person who balances bank statements. In small companies, management checks finance because they cannot afford separate persons or an independent organization.
Types of Transactions
The types of transactions are different according to the business for the pre-audit process. For example, the pre-auditing process includes travel expenses, invoices, meeting expenses, checks, and taxes.
Why is the Pre-Audit process necessary?
It is essential because companies get a chance to catch and correct finance and accounting mistakes on their own before auditing company finds any error.