Audit Season is Coming
By Gary Smith, Director, Assurance Services
With the recent long Memorial Day weekend behind us, we begin to get excited about the summer ahead filled with beach days, vacations and summer picnics. But on the horizon and, for some, the very near horizon looms the thought of the fiscal year-end and the next audit season. But let’s not let our summer dreams turn into audit nightmares.
For some, it may seem a bit early to start worrying about year-end approaching, but with proper planning your audits can become a more streamlined, painless exercise that can strengthen your finance and management team, create more meaningful oversight from your management team and governing body, and provide a clean, accurate and complete set of financial information on which to make good decisions and sail through your audit.
So let me explain how you can help your organization make your relationship with your auditors one you value:
As with any successful relationship, good communication is a must. It is key to building trust, understanding points of view, and working toward a common goal. Some key factors to think about and communicate regularly with your auditors include the following:
- Did the organization have any unusual transactions during the year?
- Did the organization implement any new accounting or internal control systems during the year?
- Are there any new accounting pronouncements affecting the organization?
- Are there any new agreements that have audit significance, i.e., loans, equity, legal, employment, leases, etc.
- Are there any pending litigation or claims matters?
- Does the organization prepare board of director minutes?
These are just a few of the things that you should always communicate to your auditors in real time. Waiting until the last minute can put too much information on the table at once, creating a bottleneck in the overall process. If your auditors are aware of what is happening in your business throughout the year, it makes the whole process smoother when it comes time for the audit.
As you think back to your prior audits, you might ask yourself some questions:
- What areas of the audit went well?
- What were the biggest pain points and how could they be addressed or avoided in the current year?
- Were there significant audit adjustments? What was the nature of the adjustments and can they be addressed before this year’s audit process begins?
- Were there any control deficiencies that can be addressed prior to year-end?
- Was there any interim testing performed and if not, could some time be set aside to perform some testing now to alleviate the pressure of year-end testing?
- Did your staff have all the appropriate reconciliations prepared in a timely, accurate manner, or did the auditors have to keep asking? Ask the auditors to provide feedback as to the suitability of the reconciliations provided by your accounting staff.
- Did the “To Do list” get updated regularly with outstanding items tracked? (see Side Note)
Answering these and other questions can help you identify where your time and effort should be spent. It can help you prioritize the items that take more time or are more of a challenge now, so that you are not scrambling at the last minute.
3. Develop a Plan
Inevitably, as the audit gets near, your auditors will have an extensive list of items they will require (see Side Note). It is important to review this with them to ensure the items requested are understood by your staff, responsibility is assigned, and the most important items are prioritized first (such as most difficult areas to audit or items that take longer to produce). A discussion with your auditors about when the information requested in the audit plan will be ready is extremely important to help the auditors with staffing needs, which will help ensure deadlines are met and your expectations are exceeded. Sometimes understanding the purpose of a given request may lead you or your staff to find an easier way, a better report, or just enable you to help the auditors help you.
Side Note: Marcum recently rolled out INFLO to our clients. INFLO is an exciting new tool that can help the audit team and the client manage the client-requested items list in a secure and efficient manner. Some key features of this secure internet-based solution include:
- Allowing the request list to be rolled forward year to year and updated for new requests.
- A questionnaire functionality so audit questions can be asked, answered and traced.
- Dashboards for the engagement team and the client showing the status of the items requested, from the moment requested until completion.
- Ability to send you and your staff reminders of outstanding items due from your accounting team, with alerts going to designated individuals.
- Real-time information.
Before you set off for that first vacation of the summer, you should begin to get the audit ball rolling. For June 30 year-ends, there is no time to waste, and for December 31 year-ends, resolve to make this your best year ever. Get together with your staff and your auditors and set a plan in motion. Think of the annual audit as another project, and use your project management skills to tackle everyone’s needs and deliver the best results you can.