Audit Insurance – do you need it?
You’re probably asking yourself the following questions – What is Audit Insurance? and do I really want to be paying another insurance bill? I already have health, income protection, professional indemnity, and pet insurance for good measure… we hear you on this – insurance is not a fun expense but is the sort of thing that’s expensive until the unexpected happens.
What is Audit Insurance?
Audit Insurance covers the payment of professional fees, including specialists, incurred if you are selected for an audit, inquiry, investigation, or review instigated by IRD. The cost of being properly represented in these matters can be quite hefty depending on the length of time involved.
What would it cover?
All professional fees up to a prescribed limit (with no excess) are covered. Our fees, legal fees, bookkeeping fees, and other specialist professional advisor fees are covered. Audit Insurance also provides retrospective cover – so all previously lodged returns are also included in the coverage.
Is it right for you?
Everyone, and every business is different – whether you opt for it will depend on your specific situation, and likely your appetite for risk. We’re definitely not telling you to go one way or the other – this is all here to provide an explanation of what it is so you can make an informed decision. If you’re losing sleep over the thought of an audit, then it is probably for you. If you think the risk of an audit is low and your accounts are in good order, then maybe roll with the punches and give it a miss. The best step is to get in touch with us to discuss your risk and whether or not it would be the right step for your business.
How do I get it?
We’ll be sending out an annual email in August which includes The Audit Shield Master Policy for your business or group of businesses. To accept the policy, payment needs to be made to our bank account and this triggers the start date of your audit insurance policy. Although it’s a simple process on your end – The Outside team receives a small commission from Accountancy Insurance New Zealand to cover the administration costs of providing this service.
How can you reduce the cost of an audit?
Whether you have audit insurance or not there are some general rules you should be following to reduce the costs of an audit and be compliant from a tax perspective:
- Streamline your bookkeeping process by using Xero and Hubdoc – remember Hubdoc is now included in your Xero subscription. IRD requires you to keep your records for up to 7 years. This is especially important for any expenses over the value of $50. Hubdoc is a great solution for storing this information electronically. Check out our How-to Hubdoc video for more information.
- Get clear on what expenses you can claim for tax purposes. If unsure get in touch with your Outside go-to to clear up any grey areas. As always, make sure personal expenses are not running through the business account. This just creates unnecessary work for you and the team.
- Get advice from your Outside go-to before making any big purchases, OR if you are thinking about restructuring your business. Launching into decisions without fully thinking something through can have major tax implications and create an opportunity for an audit. If in doubt always get in touch with your Outside go-to.
Although we’re holding off on face-to-face meetings while at level 2 COVID restrictions, we’re always keen to catch up via teams. In the meantime keep calm, carry on, and don’t forget we’re here to chat through any queries or concerns you may have.
For more info straight from the horse’s mouth check out what IRD has to say about Audits.
Your Outside team