The mindset

1.    Before fieldwork begins, meet with your office team to explain the purpose and benefits of financial statement audits. Novice staff members may confuse financial audits with Revenue audits, which can sometimes become contentious and stressful.

2.    Designate a liaison in the accounting department who will answer inquiries and prepare document requests for auditors.

Reconciliation

3.    Enter all transactions into the accounting system before your auditors arrive, and prepare a schedule that reconciles each account balance.

4.    Be ready to discuss any estimates that underlie account balances, such as allowances for uncollectible accounts, warranty reserves or percentage of completion.

5.    Check the schedules to reveal discrepancies from what’s expected based on the company’s budget or prior year’s balance.

6.    Review last year’s adjusting journal entries to see if they’ll be needed again this year. An internal review is one of the most effective ways to minimize errors and adjusting journal entries during a financial statement audit.

Work papers

7.    Prepare work papers to reconcile account balances and transactions in advance. Auditors will ask for original source documents to verify what’s reported on the financial statements, such as bank statements, sales contracts, leases and loan agreements.

8.    Compile these documents before your audit team arrives. They may also inquire about changes to contractual agreements, regulatory or legal developments, additions to the chart of accounts and major complex transactions that occurred in 2016.

Internal controls

9.    Evaluate internal controls before your auditor arrives.

10.    Correct any “deficiencies” or “weaknesses” in internal control policies, such as a lack of segregation of duties, managerial review or physical safeguards. Then, your auditor will have fewer recommendations to report when he or she delivers the financial statements.

Value-added

Financial statement audits should be seen as a learning opportunity. Preparing for your auditor’s arrival not only facilitates the process and promotes timeliness, but also engenders a sense of teamwork between your office staff and external accountants.

Speak to us

To discuss any questions you may have or if you’d like a review of your financial statement audit process please contact Andy Quinn or Cormac Reilly.