Written by: Joe Anufrom
Audit preparedness is a key factor in having your audit engagement run smoothly. Not only can audit preparedness avoid delays, repeat follow-ups on requests, and schedule conflicts, but it can also help avoid any additional fees due to delays or added work from unexpected activity that falls within the audit scope. To avoid these complications and optimize audit preparedness, below we detail five tips to help you prepare for your financial statement audit. As an additional benefit, following these tips can expedite the audit process and allow you to refocus on your daily priorities sooner.
1. Expect and Plan for Inquiries
During each audit phase, your auditor will look to set up meetings with various members of management, ranging from the CEO, CFO, controllers, and other departments. These meetings will enable your auditor to update their understanding of internal controls, annual activity, and any new business components that could warrant changes to the audit scope or planned procedures (e.g., new controls, significant transactions, litigation, ongoing concern, fraud). These discussions can consume multiple hours during the week, particularly with internal controls. Therefore, coordinating the best approach with your auditor to schedule and meet with the respective personnel can allow individuals to be prepared for the topic at hand, and avoid recurring follow-ups as the audit progresses.
2. Prepare for the Request List Before it is Sent
Preparing for the financial statement audit does not need to wait until the auditor sends the request list, especially if it is a repeat engagement. In order to stay ahead of schedule and prepared for the list to come, use the prior year’s request list as a guide. Additionally, consider the use of a shared drive for all employees involved to begin gathering requests for quarterly reports, significant transactions or activity details, or new/amended agreements as they become available. Having the request list items ready before the auditors begin their work will allow them to hit the ground running with the available information. This will also enable you and your employees to focus on daily tasks while the auditors work ahead of time on the information provided. If this is your first financial statement audit, you can review our recent insight on the 7 tips to prepare for your first financial statement audit.
3. Delegate the Request List
Depending on the size and nature of your company’s operations, the audit request list can range from a few items, to a more extensive list, based on the phase of the audit. Overloading these requests onto one or more individuals could result in delays or lack of satisfying audit requests. To avoid this, designating an “audit coordinator” to manage the request list and assign individuals to the requests relating to their area of expertise can ease the administrative burden and produce a quicker request turnaround.
4. Maintain and Provide all Components of a Request
A common audit burden is a recurring or repeat follow-up on requests. This can be a result of a lack of supporting documentation or not providing the “full package” for reports. To be fully prepared, it is key to incorporate all supporting documentation of a report, reconciliation, or amendments to agreements for the auditor to have the best audit evidence to corroborate the balances on the stand-alone document. This includes providing versions of the reports that have evidence of signoffs and review for internal control requests where applicable. To avoid missing documentation the auditor may require, consider having all documentation stored electronically so that it can easily be provided upon the auditor’s request.
5. Keep Your Auditors in the Loop With Unexpected or New Activity
Timely communication with your auditor about significant or new activity is key for a smooth and prepared audit. As significant transactions occur throughout the year, it is best to inform the auditors as they happen, so you can determine if there are any accounting implications that would impact the financial statements or audit procedures. Additionally, timely communication of major activity that could fall within an audit scope will allow your auditor to provide complete requests ahead of time, and even guide you through the process when needed (e.g., subsequent events, changes to financial reporting systems, regulatory findings, new or unusual transactions, etc.)
If you have any further questions on how to best be prepared for your upcoming financial statement audit, reach out to a member of Wolf’s Assurance team.
