Tips for a Trouble-Free Financial Statement Audit

For small businesses and CPA firms, the months of January through April usually brings in a certain level of stress as both work together to get through an important accounting process known as the annual financial statement audit.  With adequate preparation, however, the objectives of the financial statement audit can be achieved with the least amount of interruption to your business.  Here are some tips for making the audit experience run smoothly for everyone.

  •  Prepare everything on the request list before the auditors arrive – Trying to prepare for the engagement while your auditors are on location is generally not ideal.  Ask your auditors for a Prepared by Client list (PBC list) of items they’ll need during the audit and have all the documents ready when the auditors arrive for fieldwork.  It is better to provide the support electronically, rather than in paper format, if possible.  Also, prepare the auditors’ working area in advance so they can start working as soon as they arrive at your office.

  • Have realistic expectations / timeline and deadlines – Your expectations of the audit should mirror your contract with the auditing firm.  It will spell out what the audit will accomplish and your responsibilities.  When planning out the timeline, make sure it is realistic and communicate any changes or conflicts as soon as possible.

  • Close your books and reconcile all major accounts – One of the most difficult challenges in performing an audit is when companies don’t close their books or complete their account reconciliations before the audit starts.  Accounting books should be closed and all significant accounts should be reconciled prior to the beginning of fieldwork.

  • Explain any significant changes in your business to your auditors – Auditors use analytical procedures for a portion of their testing in most areas.  It is best to communicate significant changes (i.e. new debt, new lease, change in accounting software, major fixed asset purchases) that occurred during the year to your auditors upfront.

  • Stay in touch – Communication is the key to any success. Don’t let the annual audit be the only time you talk to your auditor.  With an adequate amount of preparation and communication during the year between the Company and auditor, the whole process can be relatively seamless for all involved. In addition, check in with your auditor regularly for information about any reporting or regulatory changes that could impact your business.

Although the audit preparation requires significant amount of work, the benefits are plentiful. The audit not only assesses your company’s overall financial condition, but also can pinpoint inefficiencies with financial management and financial reporting, identify ways to reduce risk and strengthen internal controls.

Sources:
http://www.rklcpa.com/from-the-auditor-three-top-tips-for-preparing-for-a-nearly-pain-free-audit/ (From the Auditor: Three top tips for preparing for a nearly pain-free audit)
http://www.amllp.com/resources/issues-insights/item/605-ease-on-down-the-road-5-tips-for-making-your-audit-less-stressful (Ease on Down the Road: 5 Tips for Making your Audit Less Stressful)

 

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