The three most important things to consider when buying a house are location, location, and location. However, when it comes to planning for your company’s financial statement audit, the three most important things are preparation, preparation, and preparation. You can never plan and prepare too much for an audit. In fact, the more prepared you are, the easier things will be for everyone involved when the auditors pay their visit.
Here are three tips for a smooth audit:
1. Keep an open line of communication between management and your accounting firm.
Meet with your accountant on a regular basis—not just at audit time—to make him or her aware of changes in your organization and any unusual transactions that may have occurred. Your accountant may have experience with these types of situations and can act as a sounding board or provide advice and guidance in ways to deal with a particular issue. Your accountant can also keep you apprised of any changes in the financial reporting or tax environment that may impact your business. It is always best to iron out the wrinkles related to significant changes or new reporting requirements prior to starting the actual audit process.
2. Establish a realistic timeline and deadlines.
Create a schedule that includes deadlines for both parties involved. When laying out the timeline, make sure it is as realistic as possible. If the audit is scheduled too early or deadlines are too aggressive, the timeline will be unachievable.
3. Learn what your accounting firm needs before the audit begins.
A list of what your accounting firm needs for the audit is typically called a Prepare By Client list (PBC list) or the Audit Preparation Guide. It is important to obtain this list prior to year-end closing, as the best time to prepare for an audit is during year end-closing procedures. Consider delegating some tasks related to gathering the items on the list. We find the most successful audits are those in which a team approach has been used to address auditor requests. Once you receive the auditor request list, schedule a meeting with all those who will be involved in the audit process and delegate responsibilities accordingly.
Trying to prepare for the audit while your auditors are on location is generally not a good idea. Not only will you need to handle your normal job responsibilities, but you will also need to prepare the pre-audit request and respond to additional auditor requests and questions. Establishing a regular communication process with your auditor and creating an established timeline and preparation of audit schedules before the audit begins will lead to a much smoother process for all parties involved.
Brian J. Sharkey can be reached at (215) 441.4600 or Email.