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Do you bite your nails before your external audit each year? Does your staff start showing signs of anxiety in anticipation of the auditors walking in the door?
If this sounds like your situation, take a deep breath. Top audit firm Doeren Mayhew provides five tips for making the audit experience run more smoothly for everyone involved.
You should receive a list with items needed and the deadlines for each item. Talk to your auditor before the fieldwork if you have questions about any of the items, and let them know right away if you won’t be ready by the agreed-upon dates.
Because surprise is a required element in an audit, you’ll also need to produce some accounting information on the spot, such as specific expense reports, journal entry support or grantor/program reports. Don’t worry — you can still prepare by establishing files during the year to collect the information you may need so it is readily accessible.
Your expectations of the audit should mirror your contract. It will spell out what the audit will accomplish, your responsibilities and the auditing firm’s responsibilities.
Auditors may be asked to do accounting “cleanup” work for their clients during the audit, such as preparing year-end journal entries, fixed asset schedules and various accrued liability analyses. Today’s professional standards draw a clear line between accounting and auditing services, and to stay independent, auditors are limited in the type of accounting assistance they can perform.
If there are accounting tasks you can’t do internally due to a lack of time or expertise, top audit firm Doeren Mayhew has resources to assist. We offer accounting assistance and can structure the services to remain independent from the audit, if necessary.
Draft and/or review your accounting and procedures manual. Self-assess inherent internal control weaknesses and determine the necessary internal controls to address any such weaknesses. Periodically ascertain whether your organization’s policies and procedures are being followed.
If your operations have changed or evolved, discuss these developments with your auditor during the year and update your policies and procedures accordingly. Waiting until fieldwork begins can delay the audit process.
When applying audit risk standards and procedures, deficiencies in internal controls and other weaknesses may be identified through the audit process. After reviewing the risk and internal control information you’ve assembled, the auditor could determine there is a “significant deficiency” or the more serious “material weakness.” The auditor may also observe other operational and/or accounting activities that could be improved, which may be communicated in a management letter.
For any matter identified in the auditor’s management letter, prepare a written response including whether you have taken or intend to take any action in response to the finding. This is important to the owner, audit committee or board, as they are responsible to oversee the audit and develop the overall system of checks and balances.
Don’t let the annual audit be the only time you talk to your auditor. If you save up all your questions, it’s likely to extend the length of the audit.
Look to your audit firm to keep you up-to-date on new accounting pronouncements or changes for the year so you and the board aren’t surprised after year end. Be proactive in understanding new guidances and their impact on your next audit and future financial reporting.
Although the audit — and the preparation that precedes it — requires some work, the benefits are plentiful. Having an audit completed by a top audit firm not only assesses your overall financial condition, but also can pinpoint problems with financial management and reporting, identify ways to reduce risk and strengthen internal controls. Look to Doeren Mayhew’s Michigan CPAs and Houston CPAs to leverage sound accounting practices and risk-based assurance services to help achieve a successful audit this year.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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