Advertising Audit

Advertising agencies must embrace audits because they facilitate transparency that brand clients demand. An advertising audit may identify local non-compliance with a network creative agency contract. Cyber Risk Financial Risk, Transactions & Restructuring Internal Audit & Assurance..

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Advertising Audit Services

Advertising agencies like other businesses need to conduct periodic audits of:

  • Their programs or strategies,
  • Organization and management style,
  • Environmental trends,
  • Overall effectiveness to maintain and also how to improve their performance.

Advertising Audit has become a component of the evaluation. The advertising industry is beginning to adopt new planning procedures. In particular, advertising audits can be used in different types and sizes of advertising agencies for evaluating the effectiveness of the agency that has been developed.

Advertising audit will look at all the internal controls and also the advertising agency relationship with other firms. The advertising agencies can benefit from the audit work in several ways. The audit work provides a framework for handling internal and external issues.

What are Advertising Audits?

Advertising audits are said to be contract compliance audits of creative, production, and below the line agencies involved in the development of advertising campaigns.

An advertising audit identifies the local non-compliance with a creative agency contract.

The audit of organization compensation would decide if the right charging component was being followed, be it a commission game plan, mark-ups on creation, fixed expenses, retainers, rate card-based, or an expense in addition to counting. Where an office is charging for time, an advertising audit would look at the time recording records and controls to guarantee that the customer received the assets paid for.

A production or creative agency purchases services on behalf of its clients such as production, TV, Radio, press advertising, and outdoor banners. Many contracts expect the agency to recharge such production costs at a net cost to the agency. An advertising audit will confirm that production costs have been calculated correctly. It will also clarify that the agency is not retaining any balances that need to be refunded to the client. Similarly, costs should just be energized as per the agreement, and an advertising audit would vouch these revives.

The primary role of an advertising agency is to source products and also other creative inputs from the third party. An advertising audit checks on the purchasing cycle to confirm that the procurement team of the agency implements the control that is expected by the client.

An advertising audit also identifies the weaknesses and offer suggestions for improved information flows.

What is the Aim of Advertising Audit?

By conducting advertising audit you will be able to:

  • Estimate or assess the quality of the advertising campaign.
  • To clearly understand how the tools can be used efficiently.
  • Check out the new possibilities of expanding the campaign.
  • To define the optimal budget and how to use it more economically.

What is the Process of Conducting an Advertising Audit?

The following procedure is adopted for conducting an Advertising Audit:

  • Investment Efficiency

We will take a look at your current investments made in each channel to check if the budgetary allocations are appropriate. Also, we will provide you with suggestions regarding the budget, i.e. whether it needs to be increased or decreased. Proper suggestions and ideas will be provided to you so that you do not get stuck behind your competitors.  

  • Campaign Evaluations

Our team will analyze the performance of each advertising campaign by an Ad Group, Image, Keyword or video. While doing this, other factors can be improved, such as CPC, CTR and ROI.

  • Final Report

A complete and in-depth report will be prepared to identify your campaign's strong points and also the potential points of improvement. Further, we will also include recommendations on topics such as cancellation of campaigns, reallocation of investments, copy improvements and selection of keyword groups.

  • Audience segmentation

In this step, new ways will be proposed to you for improving the segmentation of the target market for enhancing both the impact created by your content as well as the audiences CTR.

  • Post-audit follow-up

We will also provide you with a post-audit follow up for the application of guidelines given in the report by our team of experts.

What are the Key Elements of Advertising Audit?

The critical elements of an Advertising Audit are:

  • To confirm compliance of the agencies to a client or agency contract or agreement.
  • To audit of remuneration of the agency.
  • Audit related to production and other pass-through costs.
  • To conduct an audit of chargeable expenses.
  • To ensure that the client’s procurement policy is followed.
  • Identification of related party transactions.
  • Identifying any process issues impacting cost and delivery.

What is the Checklist for Advertising Audit?

The checklist for advertising audit is enumerated below:

  • Care must be taken for considering the messages conveyed to consumers, as the consumers can hit back from a claim.
  • The capability, as well as the performance of the product, must not be exaggerated.
  • The pricing of the product should be transparent.
  • All the relevant information must be clarified in the ad itself, and it should not mislead in any way. These can include any significant conditions made in an offer that must be stated close or clearly linked to the main claim.
  • The qualifying text, which is also known as the small print, should be used to clarify the central claim in an ad, it must not be used to hide any essential information.
  • You must hold before presenting an ad a shred of adequate evidence to support all objective claims i.e. those that can be proved. In advertising audits related to claims such as health, beauty, slimming ads, the level of evidence required is high.
  • Unqualified environmental claims such as environmentally friendly or zero-carbon should not be used until it can provide convincing evidence related to it. There must be clear evidence showing that the product will cause no environmental damage by taking into account the complete life cycle of the product from manufacture to disposal.
  • While conducting an advertising audit, marketers are responsible for substantiating claims that appear in testimonials in a similar way as other objective claims. It is also necessary to hold Documentary evidence and contact details of the person who gave it.
  • It is allowed to make a comparison with the competitor. This is done in the interest of vigorous competition in public information. However, a person must ensure that you hold evidence with regard to both your product and your competitor. You must check on the competitor to confirm the comparison.

How is the Advertising Audit Report Prepared?

The procedure to prepare advertising audit report is as follows:

  • Completeness

For ensuring the completeness of the advertising expenses accounts in the income statement, the auditor needs to obtain the advertising schedule to reconcile with an advertising contract listing. If in case the auditor finds any discrepancy between these two listings, the management must provide an explanation for this point.

  • Accuracy

This point covers matters relating to the actual amount of the advertising expense that is presented in the income statement as well as in the advertising contract listing. This means that the amounts and other data that are related to top transactions are mentioned in the accounts correctly. For example, the amount that is appearing in the advertising contract must be reflected in the actual advertising expense amount that must be paid to the suppliers.

  • Existence

The auditor must check the advertising contract by choosing some contracts for vouching. There are certain specified risks that the advertising, as well as the schedule at which the company agreed with its suppliers, does not exist.

  • Presentation and Disclosure

This assertion is made regarding the disclosure of valuable information on matters concerned with the financial statement to the users of financial statements. These include the accounting policy, significant contract, as well as an authorized person who can sign the contract.

  • Cut-off

The auditor should also focus on the cut-off. In case the auditor fails to check the cut off properly, the amount of advertising expense presented in the income statement will be overstated or understated.

What are the Advertising Audit Services in Enterslice?

While carrying out advertising audit, our professionals will:

  • Trace the keywords and also its usage.
  • Work out on the recommendations regarding the optimization of texts in order to increase their clickability.
  • Analyze all the start pages of websites and also work out recommendations on their improvement.
  • Carry out audits related to advertising grounds.
  • Work on the optimal budget policy.
  • Work out on recommendations on adjusting time and geography options for advertisements.

What are the Risks Associated with Advertising Audit?

Advertising Audit risks that are related to advertising expense is entirely different based on auditor understanding of its control, the nature of the expense and also the nature of the company.

The following are the risks associated when an advertising audit is performed on the advertising expenses:

  • The discrepancy between the balance per recording and its supporting Document

    : The auditor needs to perform a test of detail by selecting some sample of the advertising transaction to check.
  • The significant variance between GL amount with TB amount of advertising expense account and its supporting Documents and management could not explain to the auditor:

    In these circumstances, the auditor needs to ensure that the variance is defined with a proper acceptable explanation. There could be an omission of advertising expense transactions, or the accountant might have failed to post some deal into the system.
  • Fictitious contract

    : This type of contract is prepared by some unauthorized person and can lead to the financial loss of the company. This indicates that the company has no proper authorization matrix.

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Frequently Asked Questions

Advertising agencies must get their audit done to become a neutral agent for their client. Audits will also bring transparency in their business practices

The advertising agencies have a long term benefit. There is value in strategic thinking and how the media works to drive outcomes. Agencies must have the ability to fulfil that value.

If you hire Enterslice for auditing your results, you will get the best professional advice relating to matters such as budget optimization or target keywords etc.

Enterslice will reframe the conversations to be less about buying and more about strategic thinking, operating systems, and outcomes. We will also reframe those conversations with clients. Our professionals have done an excellent job reintroducing some discussions and some services that should be happening on the agency side. That is ultimately what is going to be of value for your agency.

Advertising audits are contract compliance audits of creative production and below the line agencies involved in the development of advertising campaigns.

Apart from gaining comfort that a contract is being followed as expected, or learning of issues which should be addressed, the client is very likely to receive a financial benefit in the shape of the refund of creative over-billing, the write-off by the agency of unauthorized overspends, or the disallowing of non-chargeable expenses. Other benefits could include the identification of credit notes not offset by the client, the identification of under or over-servicing by the agency, or agency income earned in addition to the agreed remuneration.

Any client having a significant advertising budget must consider such audit. There is a compelling argument to ensure correct stewardship of client monies, test the implementation of the agreed contract, and identify opportunities for improvements in the client/agency commercial relationship.

Conducting an advertising audit is essential because of the following reasons:

• To estimate the quality of marketing.

• For understanding the targets.

• To research in matters defining the behaviour of consumers and competitors.

• To check the advertising budget.

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