Getting an audit done for your organization is not as simple as “hiring the auditors” and then sitting back and watching things go smoothly while you focus on doing your job.
If you have been part of an audit, or hired auditors, you will know that there is a great deal of your time as well as the auditors’ time which is required.
In our experience providing pre-audit assistance, there are 6 things which, if done in advance, will significantly reduce the amount of time – and therefore money – that must be spent on your audit.
- Prepare roll-forward schedules, audit confirmations and financial statements.
Why have the auditors spend time preparing these schedules, when it can be done 1-2 months prior to year-end, well before you get too busy? You can assign someone from your team to get to work on them right away.
- Ask the auditors if they can perform interim testing.
If this is possible, you can then roll forward the balances, and a significant portion of their testing can be performed when it is not crunch time.
- Make sure you are in compliance with your loan agreements and other contracts.
Review all contracts executed during the audit year and make copies of the executed contracts and review to ensure compliance.
- Review the general ledger for any unusual balances/transactions and make sure sub-ledgers tie out to general ledger.
Look at your accounts receivable and accounts payable aging reports, and make sure they agree to the general ledger.
- Review your revenue recognition policy (documented in the financial statements) and make sure you are following those procedures.
Test a couple of sales transactions to see if your documentation supports the policy.
- Make sure your filing system is in order.
Whether it is electronic or in a file cabinet, the more organized you are, the less time the auditors need to spend looking for things. Vendor and customer files should be organized with current year documents and filed systematically. Bank statements and reconciliations should be accessible and prepared in a timely manner.
To help you get started, we have developed a handy Pre-Audit Checklist which you can download – it will walk you through everything you need to do! Naturally you can talk to us to find out how it applies to you and your business.