As a business owner, an audit by a firm of accountants may seem like a costly, unnecessary service. In Canada, a company is under no legal obligation to have an audit of its financial statements. However, many of my dealership clients in Alberta, Canada, are required to prepare audited financial statements driven by bank requirements.

What I want to get across in this edition of my blog is that your audit can be a really useful exercise and should not be seen as an inconvenience. Your accountant is a key member of your team of advisors and should be used as such.

What is an Audit?

Put simply, an audit is when your accountants come in and ensure that the numbers you are reporting in your financial statements are accurate to a certain level of materiality. The auditor will put an audit opinion on the financial statements that states that the financial statements are free from material misstatement.

In Canada, we also perform review engagements and “notice to reader” engagements, which offer differing levels of assurance.

Added Value

An audit does much more than you might think. To be able to carry out an audit, the audit team will need to understand the way the dealership operates. This is done by talking to dealership staff and understanding and documenting the dealership’s processes.

Senior members of your audit team will be able to tell whether your systems are consistent with other dealerships, and any recommendations for improvements will be included in the management letter. The management letter is a letter from the auditor to the owners/directors of the dealership detailing areas for improvement and suggesting on how to improve.

If you are not currently receiving a management letter, ask your auditors why not. Receiving a management letter is not a sign that you are not doing things right, but just that there could be some areas to improve on.

Tax Planning

For our private companies, once the audit is complete, the company’s taxes will also be completed. Having audited the company’s financial statements, the accountant has a detailed knowledge of the company’s business, which enables him/her to prepare the best possible tax planning strategies for you.

Picking the Right Accountant

People do not change accountants very often. It is usually as a result of a mistake the accountant has made, or the person you deal with at the firm is leaving. However, don’t be afraid to ask your accountant to provide some other services. Ask them for their recommendations on your business systems. If you are about to enter into a large transaction, check with your accountant you are doing it the right way. Your accountant is there to service you.

We are constantly looking for ways to service our clients better. Our audit closing meeting is always when we bring to the table some other possible activities, outside of the audit. For example, has the owner considered estate planning possibilities? Are their wills up to date? Is insurance in place in case anything were to happen to the owner?

Your accountant should be seen as another member of your team and should be used as a business advisor.

BIO: Paul Harris is a senior manager with the firm of MacKay LLP, chartered accountants and business advisors based in Edmonton, Alberta, Canada. For more information on MacKay LLP, visit mackay.ca; follow Harris on Twitter: @PaulJWHarris.