Organize, don’t agonize! Preparing for an audit may seem like a daunting and time-consuming task, but following some key steps will result in an overall more efficient audit process!
The American Institute of Certified Public Accountants (the “AICPA”) provides a ten-step approach to a successful audit. As the AICPA is thorough in its descriptive listing of this approach, we will focus on some crucial steps in achieving a successful audit below.
According to the AICPA, the first step to a successful audit is: plan ahead. This means that your organization and accounting team should devote additional time during the year-end close process to adequately prepare for questions that may arise during audit fieldwork. One way to get ahead of the curve is to treat audit preparation as a year-long process. If schedules and reconciliations are maintained and kept up-to-date throughout the year, an organization can reduce the time it takes to prepare these schedules at year-end for the auditors.
Another step noted by the AICPA is: learn from the past. An organization should make note of any prior year audit adjustments, using these as an opportunity for improvement. By referencing these adjustments as a starting point for self-review, an organization can work towards ensuring similar errors do not repeat themselves during the subsequent year under audit.
Learning from the past leads into another step: perform a self-review. Once all year-end closing entries are made, take adequate time to review schedules and supporting workpapers to ensure amounts and balances agree throughout, and will reconcile to the trial balance. Another important aspect of self-review is to read and update the footnote disclosures to the financial statements. Throughout this process, be prepared to explain any financial statement line item variances from year-to-year to the auditors.
Your auditor will undoubtedly ask you to provide certain schedules and other supporting workpapers. This brings up another step recommended by the AICPA: ask questions. If your auditor requests an item that is unclear, ask for clarification prior to the start of fieldwork, if possible.
The last step we will touch on is arguably one of the most important: be available during audit fieldwork. It’s imperative that key personnel do not schedule time off during fieldwork. During fieldwork, auditors will likely be asking for additional information ranging from supporting documents to in-person interviews to discuss processes, fraud risks and internal controls. Consider asking your auditors to provide a timeline as well as status updates as they progress through your audit. Asking your auditor to provide an outstanding open items list at reasonable intervals (daily or weekly) will keep the audit on track and will aid in timely completion.
Although an audit may seem intimidating, organizations have the power to help the process run smoothly and efficiently. By following the AICPA’s ten-step list, not only will you help your staff have the proper support to answer auditor questions, you’ll also be prepared to provide auditors with all the support they request in a timely manner. One final tip….when supporting schedules agree, without error, to the trial balance, you are one step closer to cruising along to a prompt and pain-free audit completion and issuance.
For general questions or additional support about how to prepare for your next audit, feel free to contact Kristi Yanover, Audit Partner, at email@example.com, or any member of our Accounting & Assurance Team.