The audit preparation process can be a cumbersome task but, if done correctly, it may go more smoothly. Take into consideration these various steps.
1. Plan ahead
It is important that you review findings from the prior year audit. It’s important to keep contact with your auditor throughout the year to discuss any questions or concerns that come up – especially if any new accounting standards are to be implemented. You should also perform monthly reconciliations on cash and investment accounts. If the entity operates on an accrual basis throughout the year, accounts receivable and accounts payable should also be reconciled monthly to help ensure the balance is cleaned up regularly. It’s also important that you keep a running list of additions or disposals of capital assets throughout the year.
2. Prepare for the audit – the earlier the better!
Keep in mind that the audit is a rolling process that can (and should) be prepared for over time, not just the week the auditor is on-site. Your entity should review governing board minutes and resolutions for items significant to the audit.
Review each accounting area (cash, accounts receivable, prepaid items, accounts payable, payroll liabilities, long-term liabilities, etc.) for potential issues, including but not limited to: items that were missed and items that were included, but should not have been. Prior year adjustments may be a good indicator of where potential issues may be more common for your entity.
Perform an Analytical Review of all accounts. Consider the following questions as you perform the review: Does the balance make sense? Does it match expectations? Is the activity consistent with prior recording/accounting? Make sure that you keep any supporting documents and notes for auditors as it will likely be asked during the audit.
Prepare items on the “Items Needed Listing” provided by your auditor. It’s important that you do this as early as possible to ensure that all items are ready in time. You can ask your auditor for copies of what has been used in the past, if you have any questions. You can use the CDS Portal to upload completed documents. This way auditors can work ahead on items that are ready before fieldwork dates.
3. Fieldwork
Clear your schedule to have dedicated time to answering auditor questions during fieldwork. Consider passing on some duties to other staff members. You need to understand that the auditor is not there to find errors, but there to help your entity. You should have an idea of when your governing board will be able to have the audit presentation so a date can be set with the auditor early in the process.
If you have any questions on preparing for your next audit, visit with one of our experts.