Are you a rapidly growing company with dreams of going public? Are you are preparing now for your first audit? Perhaps you are an established company with an internal audit department or you are a small business that wants to start off on the right foot. In any case, whether external or internal, auditors have general guidelines that any company should be aware of to make the process easier and minimize pain for both parties. You may be surprised with the outcome.
First and foremost, cooperate! While the main focus of an auditor is to remain objective, there are always shades of grey and judgment will inevitably come into play. Why not stack the cards in your favor by being easy to work with? Even the most objective auditors are taught to have a healthy level of professional skepticism. Don’t give them any personal ammunition. Instead, keep the focus on the process.
Secondly, address audit findings and deficiencies. Let the auditor know that you are extremely interested in resolution and process improvement from the start. When audit findings are documented, credit is often given to areas for improvement that already have a process looking into it. This may buy additional time to implement recommendations. A key benefit from an audit is to identify areas for improvement without having to do the analysis and legwork yourself. In many cases, audits can deliver efficiencies and cost savings to your company.
Thirdly, audit findings must be supported by facts. You will not be unfairly penalized for openly providing all documentation. As a former auditor, one of my biggest frustrations occurred when clients purposefully withheld helpful and sometimes pertinent information just because it was not explicitly requested. In the end, this builds distrust and increases hours and fees from the auditor. If the auditor has to expend an unreasonable amount of energy trying to piece something together because information was withheld, they will just end up right back in your office. Realistically, you will probably have to work with this person again next year, so it’s best not to burn bridges.
Lastly, document all processes and create proper internal controls. Strive to document and implement whenever possible prior to the start of the audit. While it may not be cost effective to document every single transaction, identify large or risky transactions and document them. These are red flags for auditors and will most likely meet their materiality threshold. Additionally, make sure any unusual accounting adjustments are explainable and documented. Avoid frustration and lost time spent preparing for an audit by keeping source documents readily available in an organized fashion. When you get the auditors list of requests, you will not be unprepared digging around for items. This will build the auditors confidence in the effectiveness of the organization.
Audits can expose and highlight faults in your organization. Resulting process improvements, cost savings, and piece of mind from an audit can provide your business tremendous value. Take advantage of the opportunity and get your organization in shape today.Written by: Andrea Murray TGG Accounting