Small and medium-sized enterprises (SMEs) in Ghana must embrace regular auditing as a key strategy for improving financial accountability, managing risks and achieving sustainable growth, according to business administration student Sylvana Teiman.
Although auditing is often associated with large corporations, Teiman argues that SMEs also stand to benefit significantly from the process, particularly because many smaller businesses operate with limited financial systems and internal controls.
In Ghana, SMEs form a significant part of the private sector and contribute substantially to employment and economic activity. However, some businesses continue to operate without proper bookkeeping systems, leaving owners with limited information about their actual financial position.
Teiman noted that regular auditing can help address these challenges by encouraging businesses to maintain accurate financial records and establish better financial management practices.
Auditing improves financial accountability
One of the major benefits of auditing for SMEs is improved financial accountability.
Many small businesses combine personal and business finances or rely on informal record-keeping. This can make it difficult to determine how much a business is earning, spending or owing.
An audit provides a structured review of a company’s financial records, including its income, expenses, assets and liabilities. This can help business owners identify errors, improve record-keeping and ensure that company resources are being properly managed.
Regular audits can also encourage SMEs to establish stronger financial policies and separate business finances from personal funds.
Audited accounts can improve access to finance
Access to funding remains an important challenge for many SMEs seeking to expand their operations.
Banks, investors and other financial institutions often rely on financial statements when assessing the financial position and risks associated with a business. SMEs with incomplete or unreliable records may therefore struggle to convince potential financiers of their ability to manage funds effectively.
Audited financial statements provide an independent assessment of a company’s financial information and can strengthen confidence among lenders and investors.
For SMEs seeking loans, investment or capital for expansion, maintaining audited accounts can therefore improve their credibility and demonstrate a commitment to transparency.
Auditing supports regulatory compliance
Auditing can also help SMEs identify and address regulatory and financial obligations.
Businesses in Ghana are required to comply with various statutory requirements, including tax obligations, social security contributions and company reporting requirements.
A proper audit can reveal inconsistencies or gaps in areas such as tax reporting and employee contributions, allowing businesses to address potential problems before they result in penalties or other regulatory consequences.
Audited financial information can also make it easier for businesses to prepare annual returns and meet reporting requirements.
Better financial information supports decision-making
For SMEs, making sound business decisions requires reliable financial information.
An audit can give owners a clearer understanding of revenue, expenses, profitability, cash flow and debt. This information can help management determine whether the business can afford expansion, identify areas where costs can be reduced and assess the performance of different products or services.
With access to accurate financial information, business owners can make decisions based on evidence rather than assumptions.
Audits can help reduce fraud risks
Small businesses can also be exposed to fraud and financial mismanagement, particularly where one person handles several financial responsibilities without adequate oversight.
Teiman noted that regular auditing can help identify irregularities and weaknesses in internal controls.
Auditors can recommend measures such as separating financial duties, improving documentation and adopting appropriate accounting systems. These measures can reduce opportunities for fraud and strengthen accountability within the business.
Auditing as a business growth strategy
Despite its benefits, some SME owners may consider auditing an unnecessary expense because of concerns about cost, complexity or the size of their operations.
However, Teiman’s analysis suggests that auditing should be viewed beyond its compliance function. For SMEs, it can serve as a strategic tool for improving financial management, strengthening stakeholder confidence and supporting long-term business growth.
As Ghana’s SME sector continues to play an important role in employment and economic development, stronger financial systems will be essential to helping businesses survive, expand and compete.
Teiman, a Bachelor of Science in Business Administration student at the University of Ghana Business School, is also the 2024 winner of the KPMG Internal Audit Article Writing Competition.
She serves as Deputy Chief of Staff at the University of Ghana Students’ Representative Council and is involved in several student leadership and entrepreneurship initiatives.
Her experience includes internships with the Ghana Stock Exchange, KPMG and the African Regent Hotel. She is also a youth advocate for financial literacy and a member of the Young Investors Network, a platform working with the Ghana Stock Exchange to promote investment among young people in Ghana.
For Ghanaian SMEs, embracing regular auditing could therefore provide more than a financial compliance exercise. It could offer a stronger foundation for accountability, access to capital, informed decision-making and sustainable growth.
