Preparing for Your Year-End Audit
It is that time of year again, Audit Season! The season some dread, but dread because of the amount of work that is needed to help complete the audit. Well that is what we are here for. This article is going to provide helpful tips for your upcoming audit (or review/other engagement) to make your audit season run smoothly.
One of the most important things that you can do is reach out to your auditors, if they haven’t reached out to you. By now, hopefully everyone knows when their audit is scheduled to be. If not, reach out to make sure you are aware of the timeframe of the audit including how long the auditors believe they will need to complete the audit. This will allow your teams to know how long you have to prepare the year end information needed to complete the audit and how long you will need the necessary resources available to help with the auditor’s needs. Additionally, it will allow you to reach out to vendors or customers to inquire on any additional invoices or payments to be expected that pertain to the period under audit.
After scheduling the audit, close year-end financial numbers as tight as possible. This involves various steps. Ensure all year-end journal entries are recorded. Reconcile all accounts to various ledgers including (not limited to) cash, investments, accounts receivable, accounts payable, inventory, property, plant, equipment, wages, debt, etc. This includes ensuring additional oversight and review is performed to verify reconciliations are prepared timely and accurately.
Request “Provided By Client” List
Most auditors maintain a listing of information they will need for the audit. This listing is often called a “Provided By Client” or “PBC” list. If not provided shortly after the audit is scheduled, you should request this from your auditor. It will allow you to prepare the necessary schedules (including some of the reconciliations previous mentioned) prior to the auditors arriving for the audit. While preparing/creating the necessary audit schedules, it is important to verify that these schedules agree to the year-end trial balance that is provided to your auditors. This will help to eliminate additional work related to the audit.
In addition, ensure to provide any new or updated agreements related to debt, leases, by-laws, accounting manuals, contracts, etc that are pertinent to the audit. An effective way of doing this is to inquire of your auditors to what current agreements they may have accumulated from prior audits. Most auditors will be able to provide those to you for updating purposes if they hadn’t previously.
Revenue Recognition 606
Lastly, the new revenue recognition standard will be implemented in the upcoming reporting year. This is a complicated standard. Talk with your auditors on this implementation and gain an understanding of what you will need to provide as it relates to determining the effects of this standard implementation on your books.
In conclusion, following these simple steps are probably easier said than done. There is a significant amount of work that goes into an audit, but preparing ahead of time should allow the audit to run significantly smoother. Keep in mind that not all audit items can be determined in advance so be prepared to prepare or pull additional information, us auditors like to keep you on your toes. We hope the audit season goes well for all and, as always, stay in contact with your auditors so you can request items to help you prepare and ask any questions regarding the audit.