Get the Most Out of Your Audit While Saving Cost
|Help your auditors to help you. Work together with them, and prepare properly. That’s the best way to maximise your audit’s value to you and to your business.
Your goal is an audit which gives you assurance that your systems are sound and that your annual financials fairly reflect your economic position, whilst also containing your audit costs.
We discuss four ideas on how to achieve this by laying a good base for a smooth audit, followed by another five ideas on how to communicate effectively with your auditors during the process.
Last, but certainly not least, we suggest ways to respond to best advantage to their audit findings and suggestions.
With careful planning and good implementation, you can help your auditors give you not only a cost-effective audit but one that gives you more assurance that your systems are sound and that your annual financial statements fairly reflect your economic position.
Firstly, lay a good base
- Implementing strong internal controls and keeping up to date financial records will go a long way to ensuring a smooth audit.
- Good internal controls mean the auditors will have faith in your systems and this will reduce the amount of testing they do.
- Up to date financial records with monthly reconciliations of control accounts and explanations for significant variances will further enhance the audit process.
- One of the key audit factors is determining the risk of the financial statements being misstated, so keeping abreast of your company’s financial risks and sharing this with the auditors will help reduce their audit time.
Then, communicate well
- Have a meeting with your audit partner and advise him or her of what is happening in the business. If there is bad news, communicate this – the chances are the auditors will pick up the bad news during the audit and this could involve them doing extra work to assess how this will impact your financials.
- At this meeting, find out which staff will be on your audit. Having auditors who have worked on your audit in previous years will save you time, as they will not need to spend additional time understanding your business.
- The auditors plan a certain number of hours on your audit. Ask for this along with the hourly audit costs so you can plan your cash flow.
- Usually you send the auditors a final trial balance and from this they assess what tests they will do. If you have some group companies, send a consolidated trial balance – it is easier for the auditors to understand how the business is performing if they work down from the highest to the lowest level.
- When your auditors request information, make sure it is accurate and what they want. Once the audit starts, designate a senior finance person to liaise with the auditors and to meet regularly with them. Any queries or misunderstandings can be swiftly resolved. This person can monitor how the hours worked and audit costs are panning out, so if the audit looks as though it will run over budget, you can react before extra costs are incurred.
Your auditors’ recommendations
Your auditors will present you with their findings and suggestions as to how to correct any weaknesses they find. Most times you will implement their findings but if there are some you decide won’t work, discuss this with them and get their acceptance of your reasons for not making the proposed changes. This will save time at the next audit when the auditors check how your firm has progressed with their recommendations.
Good planning and good communications will help to keep your costs to a minimum whilst getting assurance on your accounting and internal controls.