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An audit is undoubtedly a great way to keep the business under constant check and evaluation, leading to improvements. No matter how strongly you propagate your business’s audit, one of the things that will force you to quit the process is the need to provide a ton of information to the auditors. And it is made easier with contract management solutions.
Maintaining the required information in a specific format, providing it to the auditors, and offering supporting documents for everything is tedious. That does not mean auditing is non-productive for your business; it just highlights that you need to manage things better and that contract management solutions can do it for you easily.
A smooth audit process naturally occurs when contracts are centralized, standardized, and systematically managed within contract management software solutions.
What Information is Required in the Auditing Process?
The auditing type usually determines the exact types of documents required during the process. However, here is a list of a few documents considered essential during the process:
- Company Objectives
- Financial Statements for multiple years
- Contracts initiated, closed, and maintained by the companies
- Terms agreed upon with different stakeholders
- Risk Management Program
- Security Policies
- Vendor Management
- Incident Management and Disaster Recovery Documents
You can easily manage most of these documents using a contract management solution. With contract management solutions, you can track the contracts, deliverables, milestones, and the actual implementation phase. Overall, you can expect CLM solutions to make the entire process less time-consuming.
What Makes an Audit Successful?
Irrespective of the audit type, certain characteristics have to be managed in an audit to make it successful. These include:
Objectivity
Objectivity deals with a clear statement by the auditor that the processes in the organization are transparent and comply with the law. It is only possible when you provide the supporting documents for each transaction or contract.
Timeliness
The auditors have to complete the entire process within a specific time range. It is only possible if you provide all the relevant details to them without wasting time.
Support from Management
You cannot expect the auditors to understand how you do things in your organization, so it is important to provide answers to all the questions asked and provide the documents required for all sorts of audits to succeed.
Types of Audit in a Business
A business can undergo multiple audit types, including but not limited to the following types:
Information System Audits
This audit type is related to the IT domain. It specifically analyzes if the technology and resources used by a business can secure the digital assets of a business or not. Professionals analyze the hardware, software, and processes to ensure the organization’s integrity.
Financial Audits
These are the most prominent forms of audit that require evaluating the financial statements and their compliance with the law. Such an audit is often conducted to protect the rights of the shareholders.
Internal Audits
Internal audits can be done to analyze the internal processes and mechanisms of doing things. It can be specific to a department or an entire organization. Such audits usually have an oversight role in the organization where malpractices or loopholes are identified.
Data Protection Audits
As the data protection laws vary, so do the audit procedures for data protection. Different states require compliance with different standards to ensure privacy and user data protection.
Tips to Prepare for an Audit with a Contract Management Solution
Preparation for an audit is not a one-time activity. You have to be on your toes the entire year to ensure that you have everything that can make the auditing process easier. Here are a few steps to prepare for an audit:
- Whatever audit you plan for, be ready from the first day and arrange documents properly because you will have to support everything with evidence.
- Apart from the availability of supporting evidence or the required documents, you must take care that you keep clean records. Saving non-essential documents will create excessive data to review, making things hectic.
- While you could be having a formal internal or external audit regularly, you must go for random checking of the system, transactions, etc.
- Providing relevant training will help your team anticipate what to expect ahead.
Although these activities can be handled manually, they will require extra time and resources. Using CLM solutions can automate considerable steps in the process.
How Can Contract Management Solutions Help You to Achieve Audit Readiness?
Using a contract management solution can make the following activities easier for you and your team, so you are always compliant with rules and set standards.
Gathering Documents Becomes Easier
CLM solutions make it easy to gather information in a central repository where you can store all audit-related records. You will not have to manually search for the right document every time your auditor requires it.
Data Redundancy is Removed
By using contract lifecycle management solutions, you do not have to worry about repetitions, format and outdated information. The software can use automated rules to help you get rid of it.
Saves Time and Resources
When everything is handled automatically using CLM solutions, you will save your organizational resources and time, eliminating all excuses for non-compliance with laws.
Complete History Available
24/7 access to the complete history of contract versions, actions, and life cycles ensure you know who made the changes and when. Also, you can restore the previous versions of the documents with greater ease through contract management solutions.
Visual Dashboards in Contract Management Solutions
Dashboards for a visual demonstration of operations make it user-friendly and save time in managing the documents.
Standardized Language to Demonstrate Compliance
As the contracts created through CLM solutions will have a standardized language, it will portray the contract compliance to the auditor during the process.
Notification Facility
Automated notifications feature in contract lifecycle management solutions ensures control over performance and risk management, helping you maintain the audit-ready status.
Summing Up
With the use of contract management solutions in your organization, you can expect to save a lot of time and money while going through the audit process. Finding all the relevant information in the digital format can enhance the productivity of the audit process.
Olga Mack is VP at LexisNexis and CEO of CounselLink CLM.