Financial audits are one of the biggest reasons why year-end reporting may be stressful. However, these audits establish you as a reliable company in the eyes of banks, government agencies, and shareholders. Generally, a financial audit involves reviewing an organization’s financial statements and related documents to ensure that they are reasonably accurate. It is conducted annually and aims to assess the company’s financial health. This can be done by assessing its accounting practices, internal controls, and other financial details. The major purpose of an audit is to express an opinion on whether the company has been able to maintain proper books of accounts or not.
You need to dedicate extra time to prepare for the audit and to be available during audit fieldwork. Also, to communicate with those involved in the audit process. Always remember that proper planning and clear expectations will help minimize anxiety and frustration. At the same time, by keeping schedules up-to-date throughout the year, you can reduce the time it takes to prepare for the audit at the end of the year.
It is also quite essential to designate someone within your organization’s finance department to be the single point of contact for the independent auditors. Do not forget to maintain an open line of communication between the organization and the independent auditors during the year. It is better to do so rather than waiting until the audit starts to discuss new or unusual transactions. This will certainly minimize surprises and enable the organization to make appropriate plans or necessary changes.
You may check for any prior year audit adjustments, internal control recommendations, or challenges encountered during previous audits. This would definitely prove to be a starting point for self-review to ensure these issues were in fact addressed and are not repeated.
When you have a meeting with the auditors, discuss what went well during last year’s audit and where there may be opportunities for improvement. Hence, more effective communication between the organization and the auditors is essentially required.
It is also essential to stay up-to-date because you may need to manage or track data in a different way. Additionally, be sure to evaluate whether accounting personnel requires any extra training to implement the latest requirements.
You must create a repository of audit schedules that can be accessed in future years by suitable personnel. Try to consider creating subfolders for significant transaction cycles or categories. For example, cash, revenue, and receivables, investments, fixed assets, debt, etc. This will make it easier to manage and retrieve schedules.
Crucial work papers containing sensitive information, such as payroll, may need to be password-protected. It must be maintained in an appropriately restricted network location. You may write new reports within your accounting software. This could automate the preparation of certain schedules and work papers.
One of the significant steps before the final audit is to look back and review the financial statements. The best strategy is to have a checklist of what crucial information needs to be disclosed. It is important to ensure that you have disclosed all information in accounts and notes to financial statements. Moreover, you must also be in a position to explain the variances of amounts from past years and budgeted statements.
It is important to keep communicating with the auditors of the audit firms after the fieldwork until they issue the audit report. If there are some open items, you must discuss and set a deadline with the auditors for information disclosure. Also, you may consider scheduling a meeting with the staff that worked on the audit process to reveal results and obtain feedback. This is called a post-audit meeting which is considered to be extremely valuable for subsequent years’ financial audits.
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