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Nobody is ever excited to be selected for an audit. During audits, organization’s finances, reporting, systems and processes are questioned. Without long-term record management, document preparation leading up to an audit can become stressful fast.
Manual processes for managing documents can scatter essential files across different departments and off-site storage locations. Having unmanaged and poor records management can have devastating financial and legal results if important documents are misfiled, lost or inaccessible to key stakeholders and auditors.
Introducing document management to your business can make audits easier by preventing discrepancies in essential records. Here’s how your business can use a document management system to control records and simplify the auditing process.
Why Do Businesses Get Audited?
When businesses are audited they provide visibility on their actions toward compliance. Any business can be selected for an audit. Most commonly, tax-exempt and government-contracted organizations face frequent and regular audits of their financial statements, tax records and business documents.
An audit inspects business information and documents from a variety of different structured and unstructured data sources to ensure rules and regulations are being followed. The results of an audit show how organizations may be at risk of non-compliance with tax, legal and industry standards.
Preventing Audits with Document Control
Document management systems (DMS) support the control and regulation of files in compliance with recordkeeping laws and other legal requirements. Key features of the technology prevent non-compliance alerts that can lead to external audit selection.
A DMS can prevent audits with document control. By creating a process to convert records into a paperless system, sensitive documents become easier to manage, locate and access. Internal audits can take place to verify access controls and interactions made with individual files.
Highly regulated industries like healthcare and accounting need document management to reduce non-compliance. When businesses outsource their document management program, audit risks can be mitigated. Potentially incorrect information can quickly be retraced back to its very conception.
A few ways a DMS can reduce audit risks include:
- Easy and instant document search, retrieval and history logs
- Sensitive information can be redacted
- Incorporation of multiple document types including receipts, paystubs and digital files
- Controlled document retention and disposal for added security coverage
- Guaranteed disaster recovery, recreating audited files in case of accidental destruction
How Document Management Systems Simplify the Auditing Process
Using a document management system is a good way to monitor your information governance program before a failed audit occurs. If you are selected for an audit, a document management system can simplify the auditing process by continuously capturing, storing, authorizing and delivering business-critical information.
Audited information from forms, applications and paper documents can be converted into searchable content that can be found at a moment’s notice from anywhere.
Here are the top 5 ways that document management systems work to make audits easier.
#1: Digitized Documents for Improved Accessibility
Document management systems make you more proactive during audits as they eliminate paper documents and their physical storage locations. When you digitize documents you can improve accessibility to particular files during an audit.
Paper documents are converted through document scanning. Then digital files are made searchable through document indexing and optical character recognition (OCR). This technology allows you to find specific documents within seconds rather than hours or days compared to traditional recordkeeping.
#2: Automates Document Security & Retention
A document management system allows you to automate document security and compliance through actionable reporting and alerts. Since some documents require different document retention policies and schedules, they must be kept by law for a set number of years.
Without the processes of a document management system in place, businesses may be left unaware of changes to state and federal laws. Many regulations are updated or added to every year!
The DMS ensures documents are maintained for their set period before being removed, automatically enforcing lifecycle audit requirements set under your organization’s specific document retention policy. Rest assured, you’re following rules set forth by state, federal and industry regulations.
#3: Improves Workflows for Employees
When preparing for an audit, it can seem like all hands need to be on deck, especially if you have to rapidly find or reproduce an important document. A document management system improves workflows for employees, especially during an audit. The system integrates seamlessly with your existing digital assets and work to link all resources together.
Easy sharing allows information and rules to be followed closely. Plus, information is available to the right people at the right time. The benefits of digital transformation expand far beyond audit procedures.
#4: Increased Transparency & Audit Trails
The entire point of an audit is to increase transparency and confirm audit trails. A document management system ensures your organization remains compliant. During an audit you may be asked to show:
- How documents are handled from beginning to end of their lifetime
- Who has access to the documents
- What edits have been made to the document
- How the documents are archived
A DMS includes automatic revision control that creates the audit trail. Each document revision is automatically captured and can be customized to address:
- Permission levels
- Document misplacement
- File alteration, deletion and overwriting
When there is no system in place to gather the audit trails of documents, you may never be able to recover the information. If information is missing, your organization could face an incomplete audit that you will have to complete again.
In the event of an audit, your DMS gives you all the information to have complete transparency with your auditor while saving you the time and stress of collecting the records.
#5: Consistent Procedure Updates & Changes
As your business grows, the information it generates grows along with it. A document management system makes audits easier when you need to adapt your processes. Consistent procedure updates and changes to documents ensure you are in control of your files and not the other way around.
Valuable audit evidence relies on consistent control over original documents, their conversion and maintenance. If you’re wondering how to start implementing internal controls of documents to ease up audits, here’s what you can do about it:
- Consult with a document imaging partner on what conversion strategy works best for you
- Identify documents to maintain under your record retention policy
- Understand how electronic documents and data must be handled for your industry
- Establish an information governance program that follows your retention policy
- Regularly dispose of records and documents according to your policy
A document management system is a key strategy for increasing operational efficiency and reducing auditing risks. If you want to learn more about simplifying your audit process, contact our team to discuss your documents management in more detail.
