Our blog series rolls on and this time some of our audit folks are weighing in on a very important topic. How do you best prepare yourself and your organization for an audit? Take in these top tips from our team members here:
It is important to always communicate with your auditors. Let us know as soon as you can if you are not going to be ready or available during your scheduled onsite work dates. If we show up and the organization is not ready, we often waste time that we could be working on another audit. It is best for auditors if we can come on site and complete all the work necessary during that time. If we leave with open items, it makes our audit less efficient which can lead to higher fees for the organization. Also, communicate early on if you opened any new bank accounts or took on any new debt during the year. Most auditors send confirmations to financial institutions to confirm the balances of the organization’s accounts at year end. It takes several days to get these confirmations completed and mailed back to the auditor. If the confirmations can be set up, signed, mailed, and returned prior to going onsite for the audit it will make the audit process go much faster. If the organization doesn’t let us know about new accounts and waits until we are onsite to provide the new information to us, then we must wait another several days to send out and receive new confirmations. This could add a week or more to the audit completion date.
– Shannon Robinson, CPA- Senior Accountant
My top tip for clients when preparing for their financial audits is to stay organized and implement a filing system that works for your company. The audit team will request a significant amount of documentation related to various financial statement areas. If a client is well-organized, it makes it easier to pull this requested documentation for the audit team and increases efficiencies on both sides!
For example, if a company has a strict organization system with well-labeled files for expenses (i.e. organized by vendor and date, invoice number, etc.), it would likely be relatively easy for them to pull the audit team’s request of a specific invoice. However, if the company does not keep a strict organization system and does not have a strict process in place when filing invoices, it would likely take excess time for them to find an invoice that the audit team requests. While this causes inefficiencies on the client-side, it can also cause inefficiencies on the audit team’s side. If it takes longer for the client to provide requested documentation, it will inevitably take the audit team longer to complete related testing procedures and potentially cause the audit timeline to stretch beyond what was initially expected.
Lack of organization on the client-side can also cause additional inefficiencies on both sides of the audit, as it leads to a higher opportunity for the incorrect documentation to be provided to the audit team. In these cases, the client may pull an invoice that is similar to the request of the audit team, but it is not the exact invoice (expense item) that the audit team was looking for. The audit team will begin work on what they believe to be the appropriate information and along the way realize that the documentation provided is inaccurate. This causes the audit team to go back to the client with additional questions or requests. The client will then have to spend additional time searching for the correct documentation and the audit team will have spent excess time analyzing the wrong details.
In some cases, these inefficiencies could lead to additional client billings and a delay in the audit completion process.
Jennie Schott-Audit and Assurance Services Assistant Senior Associate
My top tip for clients when preparing for financial statement audits is to follow the Boy Scout motto and Be Prepared. Audits are generally very cyclical and predictable, and as such, the list of requests from the audit team will be very similar to the prior year. You can take advantage of this and start getting ready for the audit prior to the receipt of their requests and, in turn, prior to them coming on-site to complete the audit.
By anticipating the requests of the audit team, you can accumulate information for the auditors as you do your normal work for year-end work, thus saving the effort of looking this information up or accumulating it at a later time. Keeping in mind what you did for the auditors in the prior year will help you be prepared for them this time around. Also, with today’s software and the ease of transferring information to and from the auditor, the more information you can get to them prior to coming on-site should make the audit more efficient – more work can be done at an earlier point in the audit, questions / issues can be addressed at an earlier point in the audit, and saving time for both you and the audit team.
Being prepared and anticipating the auditor’s needs should make the audit process smoother for both you and the audit team.
Dave Gruber, CPA- Director, Risk Advisory Services
For more information on how to prepare for an audit, please contact Holbrook & Manter today. We would be happy to assist you.