An audit and assurance service can be defined as a professional service that involves inspecting and evaluating an organisation’s accounts, internal controls, and any statutory records, and subsequently expressing an opinion on the examined set of information, as well as whether the organisation’s financial statements and all accompanying disclosures give a true and fair view of its affairs.
Start-up Businesses
A start-up business is simply a business that is in its’ early stages of operation. The early stages may be timed as months and sometimes years since the business’ inception. Such businesses are usually managed by the business idea bearers, otherwise known as entrepreneurial founding members.
Start-up businesses have over the years become a major economic focus, especially in third world countries, with nations such as the Republic of Zambia being ranked at 117 in terms of the ease of starting a business, based on a previously conducted study of a total of 190 selected world economies by the World Bank Group for purposes of a investigating the ease of starting a new business, according to the Doing Business 2020 Report published on October 24, 2019.
Benefits of the Audit and Assurance Service
Expensive as the audit and assurance service may be seen by some start-up and small business owners in a given economy, the service can yield the following benefits;
Providing assurance to the business owners. Start-up businesses may not always be directly managed by the entrepreneurial founders. The founders may instead decide to hire other qualified people to run the day to day affairs of their business, and therefore entrusting such people with the owners’ monetary and physical resources invested into the business. Under such a circumstance, engaging an independent auditor to conduct an audit of how the invested resources are being utilised to generate more profits for the business, what measures are being put in place to ensure these resources yield more returns and how feasible these measures are, would provide assurance to the business owner on the overall running of the business.
Increased chances of access to credit. Banks and other creditors are interested in giving loans to start-up businesses as this segment of their target market is undeniably profitable especially that such businesses have the potential to grow and succeed. Engaging audit and assurance service professionals in the audit of financial statements would increase the confidence of creditors and other capital suppliers in the start-up business’ financial information and therefore increasing the chances of accessing credit from the capital suppliers.
Improving business processes. Managing a robust new business may require business owners to design and clearly define business processes to be used in the business operations. As the operations and events unfold, the business processes may sometimes become inefficient or obsolete and may, therefore, need to be re-designed or replaced in order for the new business to be run much more efficiently. Involving audit experts in examining and evaluating the existing business processes can be of great benefit to start-up businesses as the audit professionals may offer sound advice on how best such processes can be improved and may also advise new business owners to employ other value-adding business processes that would, in turn, increase a business’ profitability.
Improving controls. A control is simply a procedure to determine the actions of a given process. From a business perspective, controls can be categorized into those that affect the entity as a whole and those that affect particular transactions. Entity level controls ensure that the relevant applicable laws and regulations, and management directives pertaining to an organisation as a whole, are adhered to. Transaction level controls are those that affect particular transactions. Prominent entrepreneurial scholars such as Scarborough and Zimmerer (1993) point out factors such as lack of experience and managerial incompetence together with insufficient financial controls as some of the major causes of small business failures. Engaging audit experts can highly benefit start-up and small business owners as the experts can be of great use in designing and implementing internal or financial controls, as well as reviewing the controls to ensure that they are continuously improving and are operating effectively. This step is key to start-up businesses as it will ensure that the resources invested in the business are adequately safeguarded.
Real-life success story thanks to Audit and Assurance Services (India’s Skoda Company)
Quick facts
Skoda is an Indian automobile company that manufactures cars and has over four models in India at the moment. Skoda’s vision for the future had a clear path: ramp up product offerings and drive growth in India’s booming auto market. Critical to success was delivering a consistently excellent customer experience at each of their 70-plus dealerships at the time. Skoda engaged KPMG in India to help steer them in creating a unified and outstanding experience across every dealership’s customer sales and service journey.
KPMG’s professionals identified the gaps and ‘pain points’ in Skoda’s existing customer experience and devised a sweeping initiative for dramatic improvement.
The Ultimate Result
A comprehensive new training and innovation program that included: major process changes to integrate technology and mobility platforms; new dealer management and measurement systems; data analytics tools to monitor customer data; and enhanced digital marketing and sales pitches. Customer engagement and satisfaction have increased and so have sales.
According to The Hindu Business line publication made on December 4, 2019, Skoda is now in the fast lane to driving growth, with auto looking at nearly 138 dealerships within India by 2023, up from the existing 63.
Conclusion
As a start-up business owner, one needs to look beyond the cost of engaging audit and assurance service providers and consider the great benefits that the service may come within the long term. Audit and assurance services remain key to business success at all stages of the business life cycle, especially for start-ups.
Mulenga Kaluba is an Accountant with KPMG Zambia. The views expressed in this article are his own and not necessarily those of KPMG.
References
- World Bank Group (2019) Doing business 2020 report: USA 1818 H Street NW, Washington DC 20433.
- Scarborough N. M and Zimmerer T.W (1993) Effective small business management: USA, New York Macmillan publishing.
- https://thehindubusinessline.com
- https://home.kpmg/xx/en/home/insights/2018/08/skoda-client-story.html
- google.com
