Communications between your audit firm, Board of Directors, and management are key to the success of your annual audit. Communications should include expectations about procedures for planning, performance, completion and auditor’s presentation of the financial statements. With a little bit of planning and preparation by all parties involved, your audit can be more effective and efficient, thereby minimizing challenges.
Once you’ve engaged your audit firm to perform your annual audit, meet with your auditor to confirm the audit plan and benchmarks. Be sure your expectations of the audit firm are clear to them and that you clearly understand the expectations of the auditors. You should both understand the who, what, when, why, where, and how for each phase of the process through to the delivery and presentation of the reports. Don’t be shy about asking why specific information is being requested. You will then be able to extract data and document information in a way that is useful to the auditor. Ask for sample workpaper templates if you are unsure of preferred formatting.
Your auditor should provide you with a detailed planning document, including the audit firm’s expectations for working space, electrical outlets, internet service, scanning equipment, and other resources. The ideal planning document will specify what documents are needed: organizational, lending, leasing, guarantees, Board of Directors listing, among others. Audit procedures will most definitely include auditor inquiries of your Directors and staff. Inform others in your organization about what to expect. Board, management, and staff may feel uneasy about the process unless they are included in the planning process.
Your planning letter should provide detail about the financial statement accounts to be audited and the related documentation and reconciliation workpapers required for each account. The auditors should provide the date they expect to receive the documentation and reconciliation workpapers. Consider documenting for staff members internal due dates for completion of reconciliation workpapers. In this way, you have ample time to review and make corrections, if needed.
Be sure to finish recording all activity for the year. The objective of the auditee is to have a closed general ledger that will need no adjustments proposed by the auditor. As part of the closing process, complete all roll-forward schedules, account reconciliations, depreciation adjustments, bad debt allowance adjustments, etc. Perform a final check of all schedules to assure they agree with the final general ledger balances.
Have everything ready for the audit team when they arrive. If possible, try providing items as soon as they are completed, in advance. This will give your auditor an opportunity to review in advance of fieldwork which will likely improve audit efficiency.
Don’t forget to communicate! Ask your auditor questions. Understand expectations and assure your expectations are understood. Be ready. Understanding and communication will produce the best results, minimize stress, and make life pleasant for everyone involved.
About the author
Joe is a 2004 graduate of Mount Saint Mary’s University, with a bachelor’s degree in accounting. He is also a 2000 graduate of Archmere Academy in Claymont, Delaware. Joe started with the firm in 2002 as a part-time intern, joining full-time in 2004.
Since then, he has worked with a myriad of clients, including entrepreneurial firms, agricultural businesses and nonprofit entities, including those with OMB A-133 audits. Joe, along with the firm, contributes to Toys for Tots, Goodwill Industries, as well as several other community organizations. He is a member of the American Institute of Certified Public Accountants and the Delaware Society of Certified Public Accountants.