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Preparing for your audit

Preparing for your audit

For many companies, the return after the festive break means the year-end statutory audit is imminent.  It goes without saying that the more preparation a company does, the smoother the audit goes.  We have detailed below some helpful hints to ensure you are in the best possible position when the auditors arrive.

1. Obtain the deliverables or “prepared by client” list well in advance – this will detail everything your auditors are expecting to see such as your fixed asset register, your bank statements, and your debtors and creditors ledgers.  And don’t be afraid to challenge it – some items won’t be applicable to your entity.  Also, do you have an alternative report that will do the job? Auditors will detail a precise format but if you have all the information in an existing report this will often fulfil the auditors’ requirements.

2. Provide your auditor with read-only access to your accounting software – this will enable them to select samples in advance of the audit fieldwork and provide you with the maximum amount of time to prepare.

3. Ensure you agree how to transfer documents to your auditors – auditors will generally want documents electronically these days so agree the best way of doing this.  Some companies set up their own file sharing sites, whereas others utilize the file sharing facilities provided by the auditors.

4. Set out your deadlines and design your timetable working back from these – make sure your auditor is fully aware of the timetable.  It’s also a good idea to make the timetable as granular as possible so that all key deliverables or actions are included. Also, share this with your finance and wider team as appropriate to make sure key individuals are available to speak to the auditor during the audit process. If a new deadline emerges during the process it is a good idea to give the auditor plenty of notice of this if you can, so that they are able to ensure they can deliver.

5. Agree the logistics with your auditor – will they audit onsite or remotely or adopt a hybrid approach.  Also agree with your auditor how you will communicate throughout the process – would you prefer email queries, ad hoc face to face questions or a daily Teams meeting?

6. Prepare and follow a year-end checklist – ensure your checklist covers all the procedures necessary to complete your year end, whether that is updating your fixed asset register and calculating depreciation or preparing your accruals schedule.  Ensure your finance team is aware of any task delegated to them.

7. Are your accruals complete?  Accruals are often spotted by auditors so ensure your window for identifying any additional accruals is sufficient to capture these and your process is vigorous and thorough.

8. Can you explain every balance?  An auditor will be looking for proof to support the balances and your year-end preparations provide a good opportunity to delve into each balance to check they are correct. Make sure a clear trail is available of how you arrived at the numbers. Identify any differences between your trial balance and the supporting schedules so that these can be looked into and resolved.

9. Provide a complete picture – proactively put together a collection of documents to support more significant or one-off balances.  This will pre-empt further discussions with your auditors.  It’s also a really good idea to talk through one-off transactions with your auditor to ensure they understand and can find all the relevant information within the documents you provide. If there are significant new judgements or estimates in your accounts, it is a good idea to bring these to the attention of the auditor as soon as possible (potentially before year-end). This will ensure that complex questions can be resolved early in the process rather than when the deadline is approaching.

10. And finally, book a kick-off meeting with your auditor on the morning of day 1 of the fieldwork – it’s great to fill them in on any recent developments and also ensure everyone is on the same page from the outset.

If you’d like some further help preparing for your audit, please get in touch.

 


First Published 7 December 2021
Last Updated 7 December 2021

7 December 2021
First published.

Find out more about Gary Pready

Gary Pready

Gary Pready

Audit Manager

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