Businesses and professional auditors alike are bustling during the audit season. Even long-term organizations and veteran auditors may be put off by the sheer volume of work involved in this busy time of the year. There’s just a lot of paperwork to go through to check for compliance.
For most organizations in the Philippines, the cutoff time for documenting the annual Income Tax Return is 15 April. For those who follow a different from the calendar year, the AFS should be submitted on the 15th day of the fourth month after your company’s year-end date. If you’re an entrepreneur, this is an important date to remember to avoid penalties. When submitting your Income Tax Return (ITR), non-exempt businesses must also prepare and attach an Audited Financial Statement (AFS).
Notably, an independent Certified Public Accountant’s auditor’s report must accompany each of the company’s financial statements. Fortunately, you can get this from any reputable tax and audit services in the Philippines. If you need further guidance, this article explains what audit season entails for business, its purpose, and the things needed to prepare for audit season.
What is the Much-Anticipated ‘Audit Season’?
The company’s financial position as of the end of the previous fiscal year should be accurately depicted in a statement that incorporates all pertinent financial information. This statement is called the financial statement, which has information about the company’s assets, liabilities, owner’s equity, income, and cash flows.
Unless they are exempt, businesses in the Philippines are required to submit certain accounting and tax-related documents and information annually to various regulatory agencies like the Securities and Exchange Commission and the Bureau of Internal Revenue.
Having said that, the financial statement must first be audited and approved by an independent auditor before being submitted to the SEC and the BIR. The financial statement will be audited by an independent CPA to ascertain that it complies with auditing standards and general accounting principles. Without the verification of reputable accounting services in the Philippines, investors and lenders may not be certain that the statement one is presenting is precise.
Companies typically begin their “audit season” a few months prior to the BIR filing deadline for their AFS. They will begin gathering financial data and documentation at this point, coordinating with their auditor, preparing the financial statement, etc.
What is the Rationale Behind Doing this Big Audit?
Potential lenders and investors may request a copy of your audited financial statements if you need a business loan or investment. This document offers assurance that everything is organized and in place. However, for most people, the BIR might be the first thing that goes to mind when they hear the word “audit.” This is because audits are frequently associated with the BIR’s investigation of taxpayers for possible errors in their tax returns.
Thus, one might consider being audited as an infarction or even a penalty. However, an audit is not necessarily always bad. In fact, doing a thorough audit is highly beneficial for your business because it helps you double-check budget reports, evaluate data for accuracy, and the like. Auditing is really a valuable tool to determine your company’s fiscal health.
Audit Season – How to Effectively Prepare for It
If your accounting books, finances, or financial documents aren’t in order, then getting ready for audit season can take a lot of work, time, energy, and money. It will be a tedious process if you don’t have an accounting system in place. However, tax services in Manila state that this audit procedure ought to run much more smoothly if your accounting procedures and controls were properly managed throughout the fiscal year.
Early in the year, the company should make sure the dates of transactions are in order and authorized signatures are present in each transaction made, so it will be easier for the CPA to audit the statements. They will put the company’s internal controls to the test to find out how it handles employee authorizations, responsibility delegation, and asset protection.
An auditor will need to request, receive, and examine a variety of financial documents and information that they deem relevant to the financial activities of the business over the course of the previous financial year. If the company has prepared documents and information in an orderly and complete manner, then audit season will pass by like a single-cell thunderstorm.
Do keep in mind that the kind of business you operate may affect the reporting requirements. Hence, it would be best to consult your accountant to understand your company’s responsibilities and the preparation and submission of the AFS. If you need further assistance, don’t hesitate to get in touch with our accounting services in Pasig, Metro Manila. We can help you with year-round accounting, in-depth audits, and tax compliance. When you do what’s right for your business, you can comply with government regulations and keep more of your income.
