It may sound cynical, but trust has become increasingly rare in our world. Trust in businesses and similar entities is especially dismal, even though organizations may not realize it. PwC’s 2024 Trust Survey notes that 90% of executives think that their customers have faith in their companies. In reality, only 30% of consumers do.
Whether it is corporate fraud, tax scams, greenwashing, or fudged numbers, many businesses come under scrutiny for underhanded practices. This has directly led to an increase in demand for auditing, with many stakeholders rallying for more accountability.
As a business owner or a member of an association, you can benefit from ensuring things are audit-ready, come what may.
Digitization Has Long Stopped Being Optional
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A simple yet impactful way to maintain records in a ready-to-present format is through digitization. Not only do you reduce your business’s carbon footprint by eliminating paper records, but you also ensure you don’t misplace or damage them.
It may be surprising in this AI age, but many small and medium-sized firms still don’t use digital recordkeeping. An official study by the UK’s Department for Science, Innovation & Technology finds that it is mainly large enterprises that prioritize digital data for records and analysis.
Now is the perfect time to digitize your business data and operations, before it becomes a point of contention during audits. Deloitte observes that auditing technologies are also becoming more advanced, saving time spent on collecting and assessing data.
For example, cognitive technologies that employ natural language processing can significantly speed up auditing of legal contracts. It is safest to be ready for these monumental changes.
Implement Multiple Checkpoints for Compliance
Compliance, or lack thereof, is a major issue that arises during audits. This can entail compliance related to document submissions or taxation. You may have missed updating your business operations to align with the most recent regulatory guidelines.
Businesses and associations can benefit from installing guardrails for compliance that don’t make one individual or department wholly responsible. Instead, consider setting up people in charge of various aspects of compliance:
- The details of the required task, such as documents to be prepared
- The timeline for submission
- The repercussions of being late or missing the requirements
For example, if you are part of a homeowners association (HOA), you must monitor budgets and payments. You also need to stay abreast of required document submissions, which often come with deadlines. In fact, non-compliance with governing document requirements is one of the most common mistakes in HOA tax filing.
You can avoid this problem by building a system that helps you organize documents for audit readiness. According to Ledgerly, HOAs can benefit from proactive reminders for payments and statutory compliance aligned with the legal procedures in their state.
A Human-Led Audit-Ready Culture
As you work toward audit readiness for your organization, we recommend striving for a cultural change that commits to boosting accountability and transparency. These essentially human values have become even more important as AI starts to dominate the conversation.
For instance, your business may utilize AI tools for routine monitoring to have data perpetually ready for auditing. However, the absence of human guardrails can keep this system open to curious oversights and errors. Since many AI tools are still low on explainability, you may struggle to build a strong defence at a later stage.
The Harvard Gazette even reports that some experts warn strictly against over-reliance on such tools. They fear that doing this may cause cognitive atrophy by shrinking our capability for critical thinking.
Another consideration is the likelihood of employee resistance if your business’s reliance on AI and related technologies becomes excessive. It may not be well-received by workers who are already apprehensive or tech-averse.
Anyhow, a Pew Research Center survey observed that more employees are worried than hopeful about AI in the workplace. And this is not only about anxiety over job losses. Many also feel that these technologies improve the speed but not the quality of work.
We require human intervention in audits at every step, whether you use AI or not.
Endeavoring to establish audit-readiness driven by humans and supported by technology is likely to be more sustainable.
The Takeaway
Frequent auditing can be frustrating for employees and members who must spend extra time preparing the needful. These tasks may require them to spend additional hours working, which is never a win for maintaining a balance with other priorities in their lives.
But in this age of surveillance and doubt, we must be prepared for unfriendly scrutiny at all times. Businesses and associations, despite their contributions to the economy and the community, frequently face inspections. Consequently, you may face scheduled audits or surprise ones, with the latter often sharper in intensity and thoroughness.
Keeping prepared before the last-minute frenzy can be a calmer approach to auditing. Emphasizing digitization, a pro-compliance culture, and human-driven values of accountability and honesty can help businesses and other associations be ready, always.