Preparing for an Efficient Audit

Everyone knows what a challenging experience it is going through a financial statement audit.  Many of the trying situations, last minute requests, deadline crunch, auditor cost overruns, and surprises can be avoided or minimized through advance planning and preparation. Here are some tips on how to avoid or minimize audit challenges:

1. Well in advance of the audit, request the auditor provide you with a list of account analyses and other work papers they would like you to prepare.
2. Ask the auditor what areas they had cost overruns in the prior year and areas they expect to spend the most time on during the current year’s audit. Then discuss with them whether there is anything else you can prepare for them to help them be as efficient as possible.
3. For new, significant, complex or unusual transactions, provide the auditor with a memo summarizing how you will account for the transaction. Auditors, especially public company auditors, have independence standards that prohibit them from telling the client how to account for transactions, or the auditor may have limited experience themselves with the type of transaction.  It is always more costly for the auditor to analyze these transactions on their own.
4. Request the auditor do interim work to test the design and operating effectiveness of your internal control over financial reporting. Also request that they perform audit procedures on certain accounts on an interim basis where it makes sense to do so.
5. Ask your audit committee or board and management what areas they would like the auditor to look at most closely and make sure the auditors know about it.
6. Make sure you have adequate resources in house to prepare for the audit.
7. Come up with a plan of attack well before your year end.

If you need resources or other assistance in preparing for the audit, including determining the proper way to account for complex transactions, Puncel Consulting Associates can help you. With over 30 years of experience, we have extensive experience in many areas.

Now is the time to start ticking away at the list. You will be much better off for it when the audit rolls around.