Your Financial Statement Audit: Less Stress, More Success

Take a deep breath. While your financial statement audit may be a requirement, being prepared for your audit is a guaranteed stress-reducer and will help to ease pressure and tension during the process. Take note of the following five tips for a hassle-free audit experience:

Be Prepared and Proactive

Be in contact with your auditor before your assessment. If a list of required pieces isn’t provided to you automatically by your auditor, ask them for a list of items they’ll need during your audit. If you have any questions about any of the items listed, let your auditor know and immediately communicate if you won’t be ready by your agreed- upon dates.

Although surprise is a required element in any audit, you’ll also need to produce some information on the spot. This information could include program reports, expense reports, or journal entry support. Although surprise is necessary, you can still prepare by creating files throughout the year to have all the required information in one, easy to access place.

Have realistic expectations

Expectations for your audit should reflect your contract with your auditing firm. Your contract will outline what the audit will accomplish and your responsibilities. Auditors used to perform “clean-up” accounting work for their clients during the audit—including the preparation of year-end journal entries, fixed asset schedules, and various liability analyses. This is not the case today. These days, professional standards draw a clear line between accounting and auditing services, so your auditor must remain independent of your accounting procedures.

If there are certain tasks you do not understand or cannot do due to a lack of knowledge or expertise, consider hiring a different firm to handle them. If you are fully capable to handle your own processes, then engage your audit firm to assist with certain analyses and adjustment information outside of your audit.

Reduce your risks

Draw up and review your accounting processes guidebook.  Self-assessing inherent internal control weaknesses and determining the necessary internal controls to mitigate such weaknesses is a powerful tool. From there, periodically check to verify that your organization’s policies and procedures are being followed.

If your operations have changed, discuss these developments with your auditor during the year and update your policies and procedure accordingly. Do not wait until the fieldwork begins or there could be a potential delay in your audit process.

Be ready to handle control deficiencies  

Your auditor will apply risk standards during your audit. Auditing standards define and identify deficiencies in internal control, other material weaknesses, and significant shortages. For example, the auditor will look to see if there is more than one person handling cash receipts and reviewing and approving cash disbursements and payroll, a second person authorizing contracts and their payment, and adequate oversight of your checks and balances system.

Keep communications open

Don’t let your annual audit be the only time you talk to your auditor. If you save up all your questions, it’s likely to extend the length of the audit and create more work for you and your auditor. Ask if there are new accounting announcements or changes for the year so you aren’t surprised after year-end. Be proactive in understanding the new guidance and its impact on your next audit and future financial reporting.

Although your audit requires some work, the paybacks are abundant. The audit not only assesses your overall financial condition, but can also identify complications with financial management and financial reporting, which can help to identify ways to reduce risk and strengthen internal controls.

 

For additional information, contact BiggsKofford at 719-579-9090 or info@biggskofford.com.